It was yet another traffic jam that drove me to find U.S. Concrete (NSDQ: USDQ). As I killed time sitting behind a paving truck, I reflected with colorful invectives on the number of road construction projects I encounter daily here in the Greater Boston area. Streets are being repaved, bridges rebuilt and highways reconfigured. In Peter Lynch fashion, I set out to find a company that was capitalizing on this infrastructure binge.

U.S. Concrete makes the ready-mix cement, gravel and additives used in road and bridge building, as well as in the construction of high-rise commercial and residential skyscrapers. Its products will be part of the rebuild of the LaGuardia Airport and were used to help build the Freedom Tower in New York City.

Some important points:

• In an industry in which location of operations is key, U.S. Concrete has focused on areas with fast-growing cities.
• Massive projects in Texas, northern California, New York and New Jersey and a burst of federal funding for public projects will continue to stoke demand for its ready-mix product.
• Revenue rose 25% for the first half of the year and profits jumped 20%.
• Backlogged orders, an indication of future demand, rose 27%.
• The company has built its way back from a 2011 bankruptcy with soaring sales and profits.

Most of U.S. Concrete’s business depends heavily on fair weather to pour and set concrete, a variable that makes estimating quarters notoriously difficult. A weeklong June siege of heavy flooding in Texas knocked down second-quarter earnings. However, third-quarter estimates look beatable, as the company works through these waterlogged projects and brings new ones aboard.

So now is an excellent time to buy. Our target on the stock is $80, 60% higher than current levels.

Building Bridges

My travel frustrations are a tiny taste of a countrywide epidemic. Governments are borrowing in record amounts with the money raised from municipal bonds and planning to use that cash for infrastructure projects.

Year-to-date, $272 billion of muni bonds have been issued, a number that is higher than the amount raised for all of 2015. Barclays forecasts that muni bond issuance may reach $400 billion this year. Mikhail Foux, head of municipal strategy for the New York underwriter, boldly declares that rebuilding infrastructure is “going to be the story for the year.”

With interest rates on the verge of creeping up, state and federal governments are locking in their cash by issuing low-rate bonds now. Unlike previous years, when the bulk of receipts from new bonds was used to pay off higher-interest bonds, a bigger portion of the recently issued bonds are being set aside for new spending projects.

U.S. Concrete CEO Bill Sandbrook confirmed this increase in demand for concrete from infrastructure projects during the company’s second-quarter conference call. Infrastructure, which typically accounts for 15% of the company’s revenue, has jumped to 19% of its order backlog.

The Texas’s Department of Transportation is allocating $9 billion to roadway projects this year, versus $7 billion last year. The long-awaited $4 billion rebuild of LaGuardia’s airport just broke ground in June.  U.S. Concrete is a supplier for both of these mega projects.

Not only will these projects deliver big boosts to revenue, they are often more profitable than residential buildings. There are few suppliers able to handle the rigorous specifications, complexity, customization requirements and significant volume that these massive projects need.

Location, Location …

Concrete is a local business. This slurry mess begins to harden as soon as 90 minutes after it’s been loaded into a mixer truck. This time sensitivity creates huge barriers to entry as the supplier needs a concrete plant to be within a 25-mile radius of the construction site.

U.S. Concrete has picked its spots wisely. CEO Bill Sandbrook is a strategy guru who took the reins in 2011, as the company was emerging from bankruptcy. A West Point graduate who earned four master’s degrees while in the service and served four years in the cavalry in Germany, he picks his spots carefully.

In the five years since Sandbrook joined the company, U.S. Concrete has made acquisitions in Manhattan, New Jersey and San Francisco, places experiencing higher-than-average construction growth. Plus, the company has expanded its presence in the Dallas–Fort Worth area of Texas, which accounts for almost 40% of revenue. U.S. Concrete also acquired sand and stone yards locally to ensure a consistent and close supply of raw materials. In addition to its geographic advantages, the company continually is refining and developing new concrete blends that generate much less carbon dioxide during production and can withstand greater force.

Rock Solid Numbers

U.S. Concrete’s earnings exploded in 2015, as acquisitions, pricing and lower expenses lined up to almost double earnings. As mentioned, a backup in second-quarter projects due to poor weather will result in earnings declining in 2016, but they should jump 40% in 2017 and 20% in 2018. Our target price of $80 is based on 18 times 2017 estimates, a conservative valuation to account for weather-related and cyclical risks.