Investing in rebuilding national roads, bridges and other infrastructure could provide companies with a solid foundation for growth in machinery and materials.

Heavy machinery Caterpillar and building materials company Vulcan Materials could take years of extra work rebuilding roads and bridges and upgrading buildings. The benefits are even broader, affecting Sherwin-Williams, UnitedSentals, and others who manufacture, sell, or rent building materials.

Plans have long been postponed, as economists and business leaders say, as national roads, bridges, and other infrastructure age without major overhaul. The American Society of Civil Engineers downgraded state highways in a report in 2021, finding that 40% of the system is currently in poor or mediocre condition. Many U.S. bridges, schools, and large infrastructures don’t do very well.

President Joe Biden announced Thursday: Bipartisan agreement reached About the $ 935 billion infrastructure plan. The deal was close, but a simplified plan with $ 559 billion new spending was rarely bipartisan and could later open the door to the president’s broader $ 4 trillion proposal. There are.

After Biden announced the infrastructure deal, major indices joined the surge, with the S&P 500 index and tech-heavy Nasdaq each making daily highs.

“When it comes to economic growth, we believe infrastructure contracts will greatly improve productivity,” said Ken Johnson, an investment strategy analyst at the Wells Fargo Investment Institute.

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Bull market is billed first

Analysts in Citi and elsewhere are focusing on the president’s $ 1.7 trillion US employment plan. That amount, or close to it, is likely to be otherwise approved or decided by Congress in the end.

The deal, which hits the president’s desk to sign spreads over the years, drives stock prices first before long-term gains and gains begin. From long-term construction and overhaul projects.

“Investments in infrastructure have already strengthened the very good prospects for economic growth,” said Jeff Buchbinder, equity strategist at LPL Financial, in an email. “It is very likely that over $ 2 trillion in additional spending will be made later this year, including this bipartisan agreement and the bipartisan social infrastructure treaty. This will bolster the outlook for corporate earnings and the bull market should remain strong after 2021. .. “

Citi expects almost every heavy equipment manufacturer in its coverage group will benefit from government spending, but Caterpillar could be the biggest winner.

“While not surprising to those who have completed large highway projects, Caterpillar has a strong market share in most of the heavy equipment categories in North America,” says Citi.

Caterpillar stock rose nearly 3% in afternoon trading.

The profits of many companies in the construction or industrial sector are expected to grow steadily over the next few years as the economy recovers. Spending measures spread over the years help secure and promote their growth through project contracts and supplies and equipment contracts.

Other companies winners

Manufacturers of cranes, bulldozers, and other machinery are still only part of the picture. Companies that manufacture asphalt, concrete and other road and building materials are well positioned for future infrastructure. Vulcan Materials and Martin Marietta Materials are one of the largest aggregates manufacturers in the United States.

J. Thomas Hill, President and CEO of Vulcan Materials, said on a conference call with investors, “So whether it’s roads, bridges, or other forms of infrastructure, it will help us.”

Balkan stocks rose 4% just before the market closed.

Paint and coatings manufacturers such as Sherwin-Williams and PPG Industries are also well positioned to benefit from increased government spending. Bridges require paint and other coatings to be weatherproof, but roads and buildings also require significant amounts of paint.

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