(FORTUNE Magazine) – The hiss and clang of resurgent heavy industry is sweet music to the companies that build factories. With the U.S. operating at more than 82% of industrial capacity, CEOs are beginning to think about expanding. That means boom times ahead for the nation's construction and engineering firms. ''Their shares look super,'' says John Connolly, chief investment strategist at Dean Witter Reynolds. ''With spending for plant and equipment picking up, it's hard to think of a stronger group of stocks.'' That's a stunning endorsement for companies that have been decided downers for most of the decade. Malaise in U.S. manufacturing and the collapse in oil prices decimated tremendous chunks of the construction companies' business. The dollar's towering strength in the first half of the 1980s made it hard for them to compete overseas. But unlike the protagonist in Henrik Ibsen's play The Master Builder, these constructors did not perish. By the time the dollar weakened, the companies had cut costs and acquired peripheral businesses to help cushion them from the usual ups and downs of their business. With contracts pouring in, the big builders are primed to ring up gains for stockholders. Charles Clough, chief investment strategist at Merrill Lynch, says that factory building as a percentage of total construction recently fell to its lowest point in 20 years. Then it started to turn, and in May was 23% ahead of a year ago. Clough also anticipates accelerated spending to repair the nation's decaying bridges and highways, which would mean more projects for the builders. Robert McCoy of Kidder Peabody says the best indicator of improved prospects for construction stocks is the backlog of jobs, which is up 8% in the first & quarter. Solicitations for bids on projects are at five-year highs. Analysts say it's important to recognize the positive trends because an investor would never buy these stocks on their price/earnings multiples. Even these companies' ''forward'' P/Es, based on expected 1988 earnings, would look laughably excessive to the late Benjamin Graham, patron saint of value investors. (They range as high as 30.) But Dean Witter's Connolly says not to worry: ''These stocks are order driven. Current earnings don't mean a thing. If you wait until the earnings come in and the P/E multiples fall, it will be too late.'' By then, Connolly says, the stocks will have taken off. Fluor has already climbed more than 50% this year, but most analysts still call it a buy. The recent share price of $20.50 is miles above estimated earnings of 60 cents per share for the year ending in October. The Irvine, California, company is just coming back after four years of operating losses. Its St. Joe Minerals subsidiary was particularly hard hit. Looking for relief, Fluor sold St. Joe's gold and zinc operations and took a big write-down of some of its assets. Fluor again gets most of its revenues from construction and is sitting on almost $400 million in cash. At $5.5 billion, the company's backlog is at a 4 1/2-year high. ''This is going to be a good stock for a long time,'' says Jeanne Terrile of Merrill Lynch. She expects the dividend, cut last spring, to be restored soon. Morrison Knudsen of Boise, Idaho, plans to take a pretax charge of $85 million to liquidate real estate operations and write off shipbuilding losses. The stock price has taken a hit but the dividend yield has climbed to more than 4%, which is one reason why some analysts have warmed to the company. Morrison derives about a third of its revenues from government contracts, and it bids carefully to get higher margins. Because of the write-off, Kidder Peabody's McCoy sees earnings of only $2.15 a share this year, off 14% from last year, but hopes for a big jump to $4.40 in 1989. Earnings gains should be even more dramatic at CBI, the old Chicago Bridge & Iron Co. Alan Dorsey, a special situations analyst with Dillon Read, just raised his estimate for the year to $1 a share. The real feast comes later, he predicts, with earnings hitting $2.40 in 1989 and $3.30 in 1990. CBI's general contracting business includes the construction of large metal storage tanks, and its Liquid Carbonic subsidiary is the world's No. 1 producer of carbon dioxide. The company also has a $332 million investment portfolio of pipelines, drilling leases, and real estate. Says Dorsey: ''CBI was a highflier when oil and gas were doing well. Then the stock ended up on its back.'' Now CBI is selling more to companies in the chemical, forest products, and waste treatment businesses. Earnings from Liquid Carbonic's noncyclical business are bubbling over. ''I liked CBI at $23, and I'm still recommending it at $30.75,'' says Dorsey. ''I think the stock will go to $40 within the next 12 months.'' Analysts are excited about Combustion Engineering, leader of a consortium of four companies that will build chemical plants in the Soviet Union. Terrile of Merrill Lynch thinks this perestroika play could open the doors for similar projects throughout the Eastern bloc. The Stamford, Connecticut, company, a longtime builder of electric generating and chemical plants, has tried to lessen its dependence on the capital spending cycle by peddling more of its technological expertise, process controls, and industrial software. Last year raider Asher Edelman set his sights on Foster Wheeler and bought nearly 12% of the stock. Now he appears to have lost interest in the Clinton, New Jersey, builder and boiler maker, but other Wall Streeters have begun to take notice.''There is a smorgasbord of good things to say about this company,'' remarks Kidder Peabody's McCoy. He believes that proposed acid rain legislation will compel utilities to buy more of Foster Wheeler's scrubber- equipped boilers to replace older models. He looks for earnings of 85 cents a share this year -- way up from 9 cents last year -- and $1.10 in 1989. By then, McCoy says, the stock should be in the low 20s.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: DESIGNING FOR PROFITS With American industry on the rebound, engineers at giant construction companies like Fluor (at right) are working overtime. DESCRIPTION: Revenues, net income, stock price range and recent price for the construction companies Fluor, Combustion Engineering, Morrison Knudsen, Foster Wheeler, CBI Industries.