Benefits of Infrastructure-Aligned Bills Begin to Converge
Guidance from U.S. infrastructure companies continues to indicate that 2024 could mark the onset of impactful converging effects between the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act. Despite challenging operational conditions in recent years, companies in the infrastructure sector have generally reported robust earnings, primarily driven by sustained high demand for construction in key segments. However, many of these companies have not yet realized the benefits from the substantial influx of federal and private funding. Anticipated changes in 2024 are expected to unlock potential opportunities for investors.
According to Global X, in early November 2023, the Biden Administration provided an update on the IIJA to mark the two-year anniversary of the bill’s passage. The administration reported that $400 billion for more than 40,000 projects at the state level has been announced.1 This tally does not represent “shovel-ready” projects, as many projects remain in their planning stages with several more steps needed before construction can begin. Announced projects are likely an indication of where federally funded construction could occur. We expect the total thus far to represent only a subset of what is to come from the IIJA.
Still, many projects are moving forward already thanks to the bill. Thus far, the IIJA helped launch 7,800 bridge repair projects, jumpstart renovation on 135,800 miles of roads, and fund 190 airport modernization efforts.2
On recent earnings calls, infrastructure development management teams highlighted the benefits coming from the IIJA. During engineering services company Jacobs Solutions’ fiscal Q4 2023 earnings call, management said that its IIJA-related transportation project pipeline grew 20% year-over-year.3 Also in the engineering space, Tetra Tech noted on its fiscal Q4 2023 earnings call that a large portion of added government project backlogs during the quarter were IIJA-related.4 Management also said that they expect additional revenues attributable to the IIJA to peak in late 2025 or early 2026.
