The Re-building of America - Analyst Blog
December 26 2012 - 6:30AM
Zacks
Experts warn that the
infrastructure deficit in the U.S. is stifling national
competitiveness. At the same time, some of the nations of Northern
Europe and Asia have built better systems be they, bullet trains,
super highways or airports. China continues to build world class
infrastructure that supports its chosen role as the manufacturing
hub of the world.
American transport infrastructure
was highly regarded just a decade ago but today the World Economic
Forum does not place it among the top 20 nations. In fact, the
American Society of Civil Engineers reportedly does not even give
the nation’s infrastructure facilities a passing grade. While it is
true that the U.S. may not have adequately invested in traditional
facilities (such as roads, railways and airports), the super
highways of the future are less likely to be built of asphalt and
concrete and more likely to be in speed of computation and
communications.
The passage of the Federal highway
bill (aka Moving Ahead for Progress in the 21st Century)
last summer is expected to provide a major fillip to transport
infrastructure. MAP-21 legislation provides substantial funds to
guide the development and growth of the nation’s transport
infrastructure. The future looks promising for infrastructure given
the bi-partisan discourse on the issue unlike divisive topics such
as immigration or the budget. Here we take a look at a few
companies which may benefit from the spotlight on
infrastructure.
The Industrial & Infrastructure
segment (about 41.5% of company-wide sales) of Fluor
Corporation (FLR) provides design, engineering,
procurement and construction services, with respect to both new
construction and refurbishment, in transportation and other
sectors.
We believe that private-public
partnerships will be critical for meeting funding requirements in
transportation. One such recent example is the Fluor, Virginia
Department of Transportation and Transurban tripartite effort which
achieved major completion, in November 2012, of the I-495 Express
Lanes in N. Virginia. Such cases demonstrate that Fluor holds a
leadership position in private delivery of public infrastructure
projects. Incidentally, Fluor is celebrating its centenary in
2012.
Fluor’s competitor Jacobs
Engineering Group Inc. (JEC) is one the largest providers
of professional, technical and construction services. The company
collaborates with state level departments of transportation to
manage transport projects, such as its three year contract with the
Washington State Department of Transportation to provide
operational and engineering support to WSDOT’s rail enhancement
program.
A comprehensive road building
program may not be complete without Astec Industries,
Inc. (ASTE), America’s number one maker of equipment for
asphalt road laying. The company sells equipment used in each phase
of road building, from quarrying and crushing the aggregate to
applying the asphalt. Its clients include asphalt road making
contractors and it serves government agencies.
Astec’s customers depend on
government funding for the construction and maintenance of the
infrastructural projects. The company sees a window of opportunity
as the economy recuperates and the burst of demand for gear will
have to be acquired.
Texas Industries
(TXI), with cement operations based in Texas, is strongly placed in
the key domestic markets of California and Texas. The company
recently reported bullish trends with firmer cement pricing and
rising shipments. Texas Industries’ stock is up about 65% year to
date compared with a 13.4% return from the S&P 500. Other key
cement producers show a similar run up in their stock
price.
Caterpillar Inc.
(CAT), with interests ranging from housing to infrastructure,
lowered its sales guidance for 2012 to $66 billion and its EPS
expectation to between $9.00 and $9.25, citing weaker economic
conditions across most parts of the globe. Nonetheless, this
guidance, if realized, would mark the highest revenues and profit
in Caterpillar’s history, even ahead of last year’s ground-breaking
results.
In summation, America’s decrepit
infrastructure, blamed for everything from delays to fatalities,
must be rejuvenated as a part of a national renewal. Yet, at least
at the bourses at this time, there may be relatively few winners in
this space outside the cement sector.
ASTEC INDS INC (ASTE): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis Report
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
TEXAS INDS (TXI): Free Stock Analysis Report
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