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3 Industrial Giants Set To Surge: CRH PLC, Aggreko plc And Balfour Beatty plc

Today I am looking at three engineering specialists set to hit the high notes.

CRH

Construction play CRH (LSE: CRH) cheered the market earlier today when it confirmed that the US economic recovery continues to drive business higher, and that market conditions in Europe are also normalising. These factors helped drive underlying sales 4% higher during 2014 to €18.9bn, the firm noted, which in turn drove earnings 11% higher and above previous guidance at €1.6bn.

CRH’s growth model is underpinned by a commitment to making a steady stream of acquisitions, and just this month the company smashed the value of all its previous deals by shelling out €6.5bn to purchase the assets of rivals Holcim and Lafarge.

City analysts expect this strategy to keep paying off, and predict that CRH will punch earnings growth of 95% in 2015, creating a P/E multiple of 22.3 times prospective earnings. Although this figure is well above the benchmark of 15 times which represents attractive value for money, predictions of an extra 31% bottom line rise next year drives the ratio to a much more appealing 16.9 times.

I fully expect these numbers to keep on improving as conditions in the West tick higher. And although CRH kept the full-year dividend on hold at 62.5 euro cents per share in 2014, this bubbly backdrop is expected to drive the payout higher in coming years, to 63.9 cents in 2015 and 67.1 cents next year. These projections create appetising yields of 2.6% and 2.7% correspondingly.

Aggreko

Power generator provider Aggreko (LSE: AGK) has seen its shares leap in recent weeks after Chris Weston finally ditched his role as head of British Gas to take the vacant chief executive job. And the new man at the top is joining the firm at an exciting time as end power demand across the globe continues to improve — the firm’s latest interims showed like-for-like revenues grow 6% in July-September, while orders also leapt from the same point in 2013.

Aggreko is expected to record a second consecutive earnings dip in 2014, of 12%, results for which are due on 5 March. But the number crunchers expect the bottom line to get moving again from this year onwards, with expansion of 6% for 2015 and 10% for 2016 currently forecast. These figures create P/E multiples of 19.5 times and 17.8 times respectively.

Expectations of robust growth looking ahead is expected to keep dividends heading higher during the period, and a predicted payout of 28p per share for 2014 is anticipated to march to 30.7p this year and 33.2p in 2016. These produce yields of 1.8% and 2% which, if unspectacular, I expect to march steadily higher in line with earnings.

Balfour Beatty

Investor appetite for Balfour Beatty (LSE: BBY) has enjoyed a shot in the arm since news broke in October that Leo Quinn would be leaving QinetiQ to assume the role of CEO at the troubled infrastructure group. Although the new man started life at the firm by issuing yet another profit warning last month, it is hoped that Quinn — a specialist in turning around troubled businesses — will get Balfour Beatty moving back in the right direction.

The company’s bottom line has been under the cosh during the past few years, and the firm is anticipated to punch a colossal 62% decline in 2014, results for which are slated for March 25. Still, a backdrop of improving end markets — combined with the fruits of a fresh streamlining programme announced this month — is expected to drive earnings 44% and 40% higher in 2015 and 2016 respectively.

These figures produce P/E multiples of 22.6 times for this year and 17.2 times for 2016, numbers which are unlikely to bring the house down. However, PEG readouts of 0.5 and 0.4 for 2015 and 2016 illustrate Balfour Beatty’s decent value relative to its growth potential — a reading below 1 is generally considered a steal.

All is not pristine, however, and the effect of extreme balance sheet pressure is predicted to drive the dividend to 6.8p per share in 2014 from 14.1p the previous year. And a further cut to 4.7p is estimated for 2015, slashing the yield to 1.9%. But Quinn’s stewardship is expected to herald a return to dividend growth from 2016, with a predicted 5.9p payout producing a 2.4% yield.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of Aggreko. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.