Two Construction Stocks with Real Momentum: A Simple Investor's Guide

The construction sector is shifting from a cyclical gamble to a multi-year growth story. The catalyst is clear: the U.S. is now in the execution phase of a historic policy push. The Infrastructure Investment and Jobs Act (IIJA) is moving from paper to pavement, with federal highway funding alone at about $350 billion over five years. This isn't just a promise; it's a steady flow of cash converting into real projects, from new roads to upgraded transit systems and hardened power grids.

This policy tailwind is the fuel, but the real winners are the large, diversified engineering and construction firms that can manage complex, multi-year projects. For them, the signal is in the numbers: record order books and improved margins. When government spending meets deep technical expertise and scale, it creates a durable demand cycle. Unlike traditional construction, which swings wildly with the economy, these projects-like data centers, water plants, and energy facilities-are often mission-critical and less sensitive to short-term volatility. That stability allows companies to plan, invest, and grow their profits with more visibility.

The opportunity stretches far beyond U.S. borders. Globally, the need is staggering. According to Swiss Re, infrastructure needs exceed $80 trillion through 2040. With governments lacking the resources to fund it all, private contractors are stepping into the breach. This creates a long-term runway for firms with the capability to design, finance, and build the physical backbone of the global economy-whether it's moving goods, energy, or data.

The bottom line is that construction is entering a durable expansion phase. The thesis isn't about a quick rally, but about companies positioned to capture growth over the next decade. The policy drivers are in place, the global need is undeniable, and the financial results are starting to show it. For investors, the question is no longer if the sector will grow, but which companies are best set to ride this wave.

Case Study 1: Construction Partners (CPI/ROAD) – The High-Growth Engine

Construction Partners is the clear leader in this high-growth cohort, and its latest earnings report shows why. The company didn't just meet expectations; it crushed them. In the first quarter, revenue surged 44% year-over-year to $809.5 million, while adjusted EBITDA jumped an even steeper 63% to $112.2 million. That explosive profit growth drove a first-quarter adjusted EBITDA margin record of 13.9%, a powerful signal that the company is not only growing fast but also getting more efficient at converting that growth into cash.

The engine for this momentum is a combination of strong organic demand and aggressive M&A. The company's project backlog sits at a robust $3.09 billion, which covers roughly 80-85% of the next 12 months of contract revenue. That's a solid foundation for near-term visibility. More importantly, management closed the GMJ Paving acquisition in Houston and pointed to an active Sun Belt acquisition pipeline. This strategy is working, but it comes with a cost.

The company expects to fund these recent deals largely from cash, which is a strong position. However, it also targets cutting its net leverage to about 2.5x by late 2026. That target implies a significant debt load today, as the company is using leverage to fuel its expansion. The math is clear: growth requires investment, and the balance sheet is being used as a tool to accelerate it.

The bottom line is that Construction Partners is executing a classic high-growth playbook. It's scaling rapidly, improving margins, and using M&A to dominate key markets. The risk is that this aggressive strategy requires flawless execution and sustained access to capital. If the growth slows or margins compress, the debt load could become a heavier burden. For now, the results are undeniable, but investors are paying a premium for this momentum, as reflected in the stock's roughly 16% intraday pop on the news.

Case Study 2: Jacobs Solutions (J) – The Durable Contractor

While Construction Partners is charging ahead on a high-growth trajectory, Jacobs Solutions is building a more balanced and durable story. Its recent results show a company that is not just growing, but also returning substantial value to shareholders while laying the groundwork for steady expansion. For fiscal Q4, Jacobs posted a 27.7% year-over-year increase in adjusted EPS to $1.75, beating expectations. More importantly, the company delivered a record $1.1 billion in capital returns to shareholders through dividends and share repurchases in fiscal 2025. That's a powerful signal of financial strength and confidence in its cash-generating ability.

The foundation for this durability is a massive and growing backlog. Jacobs ended the year with a record $23.1 billion in backlog, up 5.6% year-over-year. That's not just a number; it's a pipeline of future revenue that provides a high degree of visibility. A backlog this large, combined with a book-to-bill ratio above 1.0x, means the company is consistently adding new work faster than it completes it. This is the engine that supports its fiscal 2026 guidance for 16% growth in adjusted EPS at the midpoint.

The specific projects driving this momentum are key to understanding Jacobs' resilience. The company is seeing strong demand in data-center construction and complex mechanical and electrical projects. These are mission-critical facilities that support the digital economy and require deep technical expertise. Unlike simpler construction, these projects often have longer durations and more predictable pricing, which helps support margin durability. As Jacobs' CEO noted, sectors like Life Sciences, Data Center, Water, Energy & Power and Transportation are the drivers, and they are expected to remain strong.

Viewed another way, Jacobs is playing a different game. It's not chasing explosive top-line growth at any cost. Instead, it's using its scale and expertise to convert policy tailwinds into steady revenue, protect its margins, and consistently reward shareholders. It's a strategy built for the long haul, where the balance sheet and backlog act as a rainy day fund and a growth engine simultaneously. For investors seeking a construction play with less volatility and a proven track record of returning cash, Jacobs offers a compelling alternative to the high-speed, high-leverage model.

The Catch: Valuation and the Risk of Over-Optimism

The momentum story is strong, but it's not without its cracks. The most immediate warning sign came just after Construction Partners' earnings report. Despite crushing estimates with a 44% year-over-year revenue surge and a record adjusted EBITDA margin of 13.9%, the stock fell 4.16% in pre-market trading. That move is a classic "buy the rumor, sell the news" signal. It suggests some investors were already pricing in perfection and saw the beat as the ceiling, not the floor. The market is saying: you've done well, but what's next?

This skepticism highlights a broader risk in a crowded trade. The sector's strong backlog and growth are now widely known, which can make it harder for any single company to consistently surprise to the upside. When everyone is chasing the same story, the easy money is often made early. As more firms like Jacobs Solutions and Construction Partners raise their guidance and report record backlogs, the bar for beating expectations gets higher. The easy wins are behind them, and the next quarter's results will be scrutinized for any sign of a slowdown.

The more tangible risk, however, is margin pressure. Both companies are executing large, complex projects, and those are vulnerable to cost spikes. If material costs or labor shortages surge during the multi-year build, it can squeeze the profit margins that have been expanding so nicely. Construction Partners is already using leverage to fund its aggressive M&A, which means its debt load is a fixed cost that doesn't adjust with a profit squeeze. Jacobs, with its massive backlog, is similarly exposed to cost overruns on its long-duration data-center and energy projects. The policy tailwind is real, but the physical work of building is still subject to the old rules of supply and demand.

The bottom line is that paying up for growth is a gamble. You're not just buying a company's past performance; you're betting it can sustain its pace and protect its profits. The recent stock dip after a strong report is a reminder that momentum can reverse quickly when the narrative shifts. For investors, the challenge is to separate the durable, policy-backed expansion from the hype, and to ask whether the current prices already reflect all the good news.

What to Watch: Catalysts and Guardrails for Investors

The momentum is real, but the next leg of the story depends on execution. For investors, the key is to watch a few clear guardrails and catalysts that will show whether the growth story is sustainable or starting to fray.

For Construction Partners, the immediate test is converting its massive backlog into cash. The company's $3.09 billion backlog is a strong foundation, but the real question is how efficiently it can turn that pipeline into profit without a margin squeeze. The company's raised outlook and aggressive M&A strategy mean it's betting big on growth. The guardrail here is its deleveraging plan, targeting net leverage of 2.5x by late 2026. If cost overruns or slower project timing pressure margins, the fixed cost of its debt load could quickly become a problem. Watch its quarterly operating cash flow and margin trends closely.

For Jacobs Solutions, the focus is on steady execution against a record order book. The company's $23.1 billion backlog and 16% adjusted EPS growth target for fiscal 2026 are the benchmarks. The guardrail is its ability to maintain its high book-to-bill ratio above 1.0x while protecting margins on long-duration projects like data centers. Its recent record of returning $1.1 billion to shareholders shows financial strength, but the company must prove it can grow that cash flow consistently. Watch its quarterly revenue growth and margin expansion commentary for signs of durability.

The overarching engine for both companies is the flow of public funds. Any change in the pace of federal infrastructure spending or state matching funds could directly impact project awards and backlog growth. The multi-year funding under the IIJA is the bedrock, but delays or shifts in state-level commitments could create headwinds. Monitor government budget announcements and project award data for any signals of a slowdown.

Finally, track the companies' actual cash flow generation against their raised outlooks. For Construction Partners, its $82.6 million in Q1 operating cash flow is a positive start, but it needs to sustain that pace. For Jacobs, its history of strong cash conversion is a strength, but it must hit its EPS target. The bottom line is that the easy money from the initial policy push is behind them. The next phase is about disciplined execution, cost control, and converting policy into predictable profits. Watch these metrics, and you'll see if the momentum story holds or breaks.