Granite Construction (GVA, $54), one of the nation's largest civil contractors, specializes in roads, bridges, and mass transit. It figures to be a major beneficiary of Safetea-LU, the 2005 law that provided $244 billion for projects that improve safety, reduce congestion, and protect the environment across the nation.
For example, the company and a partner won a $267 million contract to rebuild the U.S. 90 Bay St. Louis bridge in Mississippi that was destroyed by Hurricane Katrina. It also expects to capitalize on California's Proposition 1B, approved last year, authorizing nearly $20 billion in bonds for transportation spending.
The company expects to see its profit margins improve now that it is wrapping up several large projects that were dogged by cost overruns. The consensus among analysts is that earnings will jump an average 32% annually over the next three years, on revenue increases averaging 6% a year, according to research firm Capital IQ. Granite has little debt and a lot of cash. The stock yields 0.75% and trades at 14 times estimated 2008 earnings, vs. 15 times for the S&P 500.