Infrastructure stocks may not hit the brakes anytime soon -- President Donald Trump apparently plans to unveil his $1 trillion infrastructure spending plan this year, in spite of reports of a delay that surfaced in February and sent infrastructure stocks tumbling. With this latest update coming from none other than the U.S. Department of Transportation, investors might even want to buy some infrastructure stocks now.

Before buying infrastructure stocks though, it's critical to understand that infrastructure is a huge sector that goes beyond roads and highways. The Department of Homeland Security recognizes as many as 16 subsectors to infrastructure, including telecommunications, energy, and water systems, which means there's a whole gamut of infrastructure stocks out there, making it difficult to cherry pick.

Picture of a bridge

Now is a good time to buy infrastructure stocks. Image source: Getty Images.

From a functional viewpoint, though, infrastructure stocks can broadly be classified into building materials like aggregates, cement, and steel stocks, construction-equipment stocks, and engineering stocks. Keeping that in mind, here are some of the top infrastructure stocks in the market today:

Infrastructure Stock Industry Market Cap* Year-to-Date Returns*
Vulcan Materials Company (VMC -1.41%) Aggregates $15.4 billion -6.2%
Chicago Bridge & Iron Company (CBI) Engineering, procurement, construction (EPC) $3.06 billion -5.7%
Caterpillar Inc (CAT 0.29%) Construction equipment $55.22 billion 1.3%
ArcelorMittal SA (MT -0.78%) Steel  23.17 billion -0.2%
Nucor Corporation (NUE 0.86%) Steel $18.45 billion -3%
Cliffs Natural Resources (CLF -0.15%) Iron ore pellets $1.99 billion -20.2%
Fluor Corporation (FLR 1.34%) EPC $7.09 billion -3.5%
USG Corporation (USG) Building materials $4.62 billion 9.5%
United Rentals, Inc (URI 1.62%) Equipment rental $10.14 billion 13.5%
Martin Marietta Materials (MLM -1.04%) Aggregates $13.12 billion -5%
Cemex SAB de CV (CX -0.68%) Cement $12.1 billion 8.5%
U.S. Concrete Inc (USCR) Concrete $966.9 million -5.9%
Jacobs Engineering Group Inc (J -1.48%) Services $6.54 billion -5.5%

Data source: Google Finance. *Data as of April 19, 2017. 

Among these, the following three are the best infrastructure stocks to buy today given their growth potential and valuation. 

An incredibly cheap infrastructure stock

Chicago Bridge & Iron (CB&I) provides technical, fabrication, and EPC services to several industries that are poised to benefit from higher infrastructure spending, including power, oil and gas, transportation, and water and waste systems. But it's only when you learn about some of the structures that CB&I has helped build in the U.S. during its 125 years of existence that you can really gauge the company's expertise level and foothold in the industry: The first U.S. marine LNG import terminal, the largest oil tanks in the U.S., and the largest water reservoir in the U.S. are just some of its achievements.

 

With that kind of a background and reputation, I wouldn't be surprised if CB&I is a key beneficiary of the federal infrastructure projects. Nearly 80% of its revenues, anyway, originated from the U.S. in 2016. CB&I's order book is also picking up -- it received new contracts worth $7.1 billion in FY 2016, driving its backlog value to $18.5 billion as of Dec. 31, 2016. For perspective, the company generated revenue worth $10.7 billion in 2016. Meanwhile, CB&I brought down debt by 15% to $2.2 billion in 2016.

Most importantly, CB&I generated free cash flows worth $600 million last year despite one-time, charge-driven losses. Compared to a loss per share of $3.05 in 2016, CB&I expects to earn $4 to $4.6 per share this year. Even on an adjusted profits basis, that represents roughly 9% growth at the higher end. Going by those estimates, this infrastructure stock is an absolute deal at a forward P/E of 6.9 and a price-to-cash flow of 4.6.

A rapidly growing infrastructure stock

Martin Marietta is one of the leading manufacturers of key building materials like aggregates, concrete, asphalt, and cement in the U.S., with a presence in 26 states. The company is firing on all cylinders, having just come off a record financial year when its sales and net profits hit record highs. Management expects the momentum to continue, projecting its aggregate volumes to grow 4% to 5.5% and selling prices per ton to improve 5% to 7%. Based on the mid-point of its fiscal-year 2017 guidance, this is what the company's growth potential looks like:

Charts showing Martin Marietta's outlook for FY 2017.

Image source: Martin Marietta.

It's difficult not to like a company that's growing so rapidly. Though Vulcan Materials is a larger aggregates player, Martin Marietta's solid foothold in growing regions like Texas, North Carolina, South Carolina, Georgia, and Colorado, Georgia is perhaps proving to be a solid competitive advantage. These charts confirm Martin Marietta's edge over Vulcan.

MLM Revenue (TTM) Chart

MLM Revenue (TTM) data by YCharts.

Just last year, Martin started operations at its largest-ever project, known as Medina Rock & Rail -- a rail-serviced quarry spread over 4,000 acres near San Antonio, Texas -- to ensure it maintains its footing in the critical Texas market.

Given that Martin Marietta stock is trading at a lower valuation than Vulcan on both a trailing earnings and a cash flow basis, and is also trading substantially below its five-year average P/E of 46 times, having this infrastructure stock in your portfolio could prove really rewarding in the long run. 

This infrastructure stock's made of steel

Whether you're building bridges, tunnels, pipelines, rail tracks, or power stations, you can't do without steel. So, when America starts rebuilding its crumbling infrastructure, steel stalwarts like Nucor are bound to benefit. But while I like steel stocks' prospects, I prefer go a step backward in the production chain and pick a supplier to steel manufacturers. It's Cliffs Natural Resources -- North America's largest manufacturer of iron ore pellets, an essential raw material for steel.

2016 was a turnaround year for Cliffs Natural as it grew its revenue by 5% and earned profits worth $199 million versus $748 million in losses in 2015. More specifically, its iron ore pellet sales volumes jumped a staggering 53% year over year in the fourth quarter, signaling a recovery in steel markets. The company also reduced its debt by nearly 18% to $2.2 billion and remained free-cash-flow positive.

One of Cliffs Natural's biggest business developments, though, was its new 10-year pellet supply contract with steel giant ArcelorMittal, which is also its largest customer. That should give you a good idea of Cliff Natural's growth potential when infrastructure projects pick up in the U.S.

With the stock down almost 17% year to date and trading at a P/E of only 7 times and P/CF of 4.5 times, you could easily consider adding Cliffs Natural to your portfolio to play the infrastructure upturn.

As soon as you have a bit of money that you can afford to invest (i.e., you won’t go hungry if you lose it all), get investing!