The Bedrock of Recovery: Why VMC and MLM Are Top Infrastructure Plays in 2025

As the U.S. economy navigates a period of high interest rates and sluggish growth, two companies are positioning themselves to thrive: Vulcan Materials (VMC) and Martin Marietta (MLM). These aggregates leaders are uniquely insulated from macroeconomic headwinds, thanks to structural tailwinds from federal infrastructure spending, pricing discipline, and operational efficiency. With UBS recently reaffirming its Buy ratings for both stocks, now is the time to consider these defensive plays in an uncertain market.

The Infrastructure Spending Tsunami: Why These Stocks Are Unmissable

The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) is only one-third spent, with $492 billion yet to be allocated through 2026. This pipeline of federal funding guarantees demand for aggregates—a key input for roads, bridges, and ports—that isn’t cyclical but mission-critical.

Both companies are prime beneficiaries:
- MLM’s Q1 2025 results showed 8% revenue growth and a 21% jump in EBITDA, driven by record pricing power (+7% ASP for aggregates).
- VMC’s adjusted EBITDA margins expanded 420 bps in Q1 2025, fueled by cost discipline and a $10.99/ton cash gross profit per ton—a 20% year-over-year increase.

Why Macroeconomic Headwinds Don’t Derail Them

While the Fed’s rate hikes and weak housing markets have stalled many industrial stocks, VMC and MLM are decoupled from residential construction cycles:
1. Non-residential recovery is underway: UBS expects 3–4% aggregates volume growth in 2026 as data centers, warehouses, and public projects (e.g., $54M for the Port of Tacoma) accelerate.
2. Pricing power trumps volume: Even if shipments stagnate, both companies are raising prices aggressively. MLM’s aggregates gross profit per ton hit $7.60 in Q1—a 16% gain—while VMC’s pricing rose 10%.
3. Operational mastery:
- MLM’s SOAR framework cuts costs while expanding margins.
- VMC’s “Vulcan Way of Selling & Operating” has reduced unit costs by 3%, even as it spent $6B on accretive acquisitions like Wake Stone (adding 60 years of reserves in high-growth regions).

UBS Validates the Bull Case: Buy Now, Reap in 2026

UBS’s $349 price target on VMC (21% upside) and $730 target on MLM (18% upside) reflect their conviction that these stocks are underappreciated plays on a 2026 infrastructure peak. Key catalysts include:
- IIJA funds hitting peak disbursement in late 2025 and 2026, with states like Texas ($28B allocated) and California ($32.7B) racing to spend before deadlines.
- Non-residential construction’s quiet rebound: While residential demand remains weak, VMC and MLM are seeing 7% ASP growth in commercial markets, where costs are less sensitive to interest rates.

Defensive Strength in a Defensive Market

In a high-rate environment, cash flow and balance sheet strength matter most:
- VMC’s free cash flow hit $869M over 12 months, with a 93% conversion of net earnings.
- MLM’s net debt/EBITDA is 2.2x, well below its 2.5x target, enabling share buybacks and M&A.

Both stocks also offer ESG tailwinds: VMC’s carbon-neutral ready-mix plants and MLM’s divestment of high-emission assets align with investor demands for sustainability.

Act Now—The Clock Is Ticking

The IIJA’s $492B unspent funds won’t last forever. With 67% of obligations now locked in, execution risk is fading—construction is accelerating.

For investors seeking resilience in a slowing economy, these stocks offer protected cash flows, inflation-hedging pricing power, and a structural growth story. UBS’s Buy ratings aren’t just a nod—they’re a roadmap to outperformance. The time to act is now, before infrastructure spending hits its stride in 2026.

Final Call:
- Buy VMC at $271.07 (Target: $349)
- Buy MLM at $459.75 (Target: $730)

The bedrock of U.S. infrastructure isn’t just where these companies operate—it’s where the next wave of returns will be built.