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This infrastructure construction stock: Is it ready to pop?

Aerial view of the wastewater treatment plant. Round sedimentation tanks. Radial primary pallet. Sediments of treatment facilities like MasTec's properties

As everyone focuses on technology stocks and artificial intelligence hype, names like Nvidia Corp. (NASDAQ: NVDA) keep beating expectations and breaking past all-time high prices. You can focus on other underrated spaces of the economy, such as construction stocks.

Stocks like MasTec Inc. (NYSE: MTZ) can expose your portfolio to subsequent industry potential rallies. It's one of the infrastructure and energy construction names that could soon pop.

Get your edge here 

While markets broke past their charts to bring you fresh all-time high prices, they could be getting ahead of themselves in the cut expectation. Initially believing that the Federal Reserve (the Fed) would act in March, traders are now backing away from that timeline and pricing the move toward May or June of this year.

You can see this live by following the FedWatch tool offered by the CME Group (NASDAQ: CME), but what do these cuts mean for the construction industry?

Warren Buffett bought into names like D.R. Horton Inc. (NYSE: DHI) because most mortgages are held at rates below 3.3%. In comparison, new mortgages hover around 7.4% today.

Homebuyers aren't incentivized to sell their property since they would have to buy another home at a much higher price and financing rate. Likewise, new homebuyers don't particularly want to pay a high mortgage and five-year-high home prices.

Analysts at The Goldman Sachs Group (NYSE: GS) have expressed their outlooks on the manufacturing sector in the United States, which is nothing short of a boom. Because the ISM Manufacturing PMI index has been contracting for the past year, the Fed cuts can bring the business cycle back into a roaring bull cycle.

Of course, this benefits the expansionary activity in sectors like utilities and energy stocks, which could also be why names like Marathon Oil (NYSE: MRO) have a 30.4% upside from analyst price targets, landing on $31.2 a share.

Similarly, MasTec analysts see a similar upside of 31.9% in their $94.20 per share targets, something the market is willing to get behind today.

What’s the view? 

MasTec stock trades at a massive discount of 57% of its 52-week high prices, raising some eyebrows about whether it could be a bargain investment today. 

This is particularly interesting when you see other stocks like Caterpillar (NYSE: CAT) trading at 97% of their 52-week highs, also supporting the infrastructure construction play.

Analysts are shooting for earnings per share at MasTec to grow by as much as 55.6% over the next 12 months, much higher than the industry average of 11.7%. Considering these optimistic growth targets, on top of the discount to previous highs, markets are not shy in letting you know how much they like this deal.

While the rest of the peer group is valued at an average price-to-earnings ratio of 15.9x, you can buy MasTec stock for a much higher 40.3x P/E. The saying "it must be expensive for a reason" applies here, and now you have a better idea of that reason.

It should come as no surprise to you to see how analysts at UBS Group (NYSE: UBS) upped their price targets on the stock up to $92 per share this month, which could be the first domino to fall in a wave of further analyst upgrades for this rally in the making.

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