© Reuters. WALL STREET: THE VALUES Of INFRASTRUCTURE PROMISING, BUT VOLATILE
by Lewis Krauskopf
NEW YORK (Reuters) – A period of volatility awaits the american values of the construction, engineering and other sectors related to infrastructure spending, but investors could benefit from it if they are resistant to an eventful drive.
These values will focus the attention in the coming weeks, while president Donald Trump, who has set the public works as a major axis of its policy in 2018, seeks to take a project of modernization of roads, bridges and other infrastructure.
A bipartisan group of u.s. senators met this week with administration officials to discuss a bill aiming to invest 1.000 billion ($1.125 billion).
Federal investments are expected to boost economic activity of businesses related to infrastructure, but the course may see an evolution in saw tooth, the time that the Congress agrees on a bill, and its details are known.
Improve the country’s infrastructure, the american Society of civil engineering has qualified as poor last year, has attracted a lot of interest.
Even if some democrats are in favour of such a program, divergent policies could undermine efforts to achieve and weigh on the amounts of private sector investment.
Regardless of a federal law, investors and analysts, however, believe that the context is favourable to the values of the sector, including the delivery to the necessary level of national infrastructure, the expected increase in profits of many businesses in 2018, and positive economic trends that support the investment in major projects.
“The money circulates in this industry, even if we don’t have the manna federal,” said Walter Todd, chief investment officer at Greenwood Capital Associates.
Walter Todd explains that his company surpondère businesses related to infrastructures, such as the civil contractor Granite Construction, companies of construction materials Eagle Materials, and U.S. Concrete and the specialist of the steel Nucor.
These securities and securities of other companies related to the construction have jumped just after the election of Donald Trump to the us presidency in November 2016, boosted by its campaign promises to invest in infrastructure.
But while the S&P-500 has been increasing steadily since the election of Donald Trump, the values related to the construction, in particular, have evolved in the teeth of the saw, suffering, in part, the last year of the uncertainty of the political agenda of Donald Trump.
The performance of the infrastructure sector remains small in relation to the one carried out in the wake of the victory of Donald Trump.
Thus, since the beginning of December 2016, while the S&P-500 gained more than 22%, the S&P-1500 construction and engineering grew by 9%, and those of the steel and building materials have taken 5%.
“A year on the other, many of these securities have not really done much,” says Walter Todd.
At this stage of the economic recovery, customers should feel more inclined to decide on capital spending on projects, according to analysts.
“LONG TERM PERSPECTIVE”
“Even without the stimulation of infrastructure or legislation on infrastructure, the sector should outperform over the next two years,” said Tahira Afzal, managing director at KeyBanc Capital Markets.
The profits of the businesses of engineering and construction (E&C) S&P-1500 are expected to grow 27% by 2018, while the compartment construction materials would earn 32%, according to data from Thomson Reuters. For comparison, the S&P-500 is expected in increase of 13.9%, according to Thomson Reuters I/B/E/S.
“The market is trading to profit levels close to records, and the companies E&C, as a sector, are not yet at this stage,” said John Rogers, founder of the consulting firm, JBR Advisory.
A certain amount of optimism about a draft law on the infrastructure may already be registered in the course. For example, Fluor and Jacobs Engineering-have increased by 28% and 18%, respectively, since the beginning of November, while U. S. Steel has jumped by more than 50%.
If other factors, such as tax reform and the global economic recovery, which could support prices, these actions are likely to lose ground if the federal project is disappointing.
“We really need to enroll in a long-term perspective and just realize that if something happens in Washington, there will be many back-and-forth,” says Eric Marshall, portfolio manager at Hodges Capital Management.
(Catherine Mallebay-Vacqueur for the French service)