Overview
Citi analyst Andrew Kaplowitz notes that engineering and construction (E&C) companies are positioned to meet or exceed consensus estimates as they head into third‑quarter earnings, even as concerns grow around artificial‑intelligence (AI) infrastructure investment momentum, affordability pressures and political scrutiny of data‑center projects. He emphasizes that demand continues to outstrip supply, and while some projects may be delayed, the delays are expected to lengthen the investment cycle rather than derail it.
The sector’s current valuation stands at 0.82x next‑twelve‑month price‑to‑earnings, below its long‑term average of 0.89x, which Kaplowitz views as an attractive entry point for investors. Rising AI demand is projected to sustain a multi‑year data‑center investment cycle, and constrained power availability further supports a constructive outlook for utilities and power‑generation markets.
Quanta Services Inc (NYSE:PWR)
Quanta Services remains Citi’s top pick and stays on the firm’s Focus List. The analyst has high conviction that the company can beat and raise guidance while delivering durable earnings growth. Quanta boasts an approximately $53 billion backlog, extensive scale, specialized capabilities and comprehensive solutions that enable earlier project involvement and broader scope. The company is well‑positioned to benefit from power‑generation, transmission and distribution projects needed to support AI and data‑center infrastructure. Margin expansion is expected to be driven by an improving business mix through expanded hyperscaler work, optimized productivity and disciplined execution.
MasTec Inc (NYSE:MTZ)
MasTec has underperformed recently due to near‑term communications‑market concerns, creating what Citi describes as an attractive entry point for long‑term investors. The firm’s backlog stands at $20.3 billion, up 28% year‑over‑year, and it maintains a robust 1.6x book‑to‑bill ratio across its Power Delivery and Clean Energy segments, providing strong revenue visibility. The recently completed Superior acquisition significantly increased MasTec’s exposure to data‑center and hyperscaler projects and added differentiated capabilities for pursuing larger infrastructure contracts.
Fluor Corporation (NYSE:FLR)
Fluor’s improving bookings momentum should support earnings upside despite potential noise from legacy projects. Recent developments include participation in LNG Canada Phase 2 and partnerships for data‑center and uranium‑enrichment projects, reinforcing underlying demand. Citi views the next two to three quarters as “target‑rich” for bookings across data‑centers, mining, power and rare‑earth sectors. Management has set a $1.4 billion ongoing share‑repurchase target for 2026, which provides meaningful support for earnings growth.
Jacobs Solutions Inc (NYSE:J)
Jacobs’ exposure to advanced manufacturing and infrastructure markets, combined with margin‑expansion potential, should underpin earnings growth. The company reports a $28.8 billion backlog, up 27% year‑over‑year, and a 1.2x adjusted book‑to‑bill ratio, delivering solid visibility. Multiple levers—including global delivery expansion, operating leverage, AI‑enabled productivity gains and contributions from PA Consulting—are expected to drive further profitability improvement.
Outlook
Overall, the E&C sector is expected to benefit from continued AI‑driven data‑center demand, constrained power supply, and a backlog‑rich environment that supports revenue visibility and margin expansion across the highlighted companies.