President-elect has pledged to spend $1 trillion over 10 years on infrastructure projects
President-elect Donald Trump’s pledge to spend more on repairing U.S. roads, airports and other public infrastructure sparked sharp gains in stocks for the makers of construction equipment, engineering specialists and suppliers of concrete and gravel. Above, a worker removes dust while working on a high-rise building in Boston. PHOTO: STEVEN SENNE/ASSOCIATED PRESS
By DOUG CAMERON and BOB TITA
President-elect Donald Trump’s election-night focus on boosting spending on domestic infrastructure drove a rally in construction-related stocks Wednesday, despite uncertainty over the incoming administration’s specific funding plans and priorities.
Infrastructure financiers said funding was less of a challenge than breaking the regulatory logjam that has bogged down big projects, such as a planned new rail tunnels under the Hudson River or new crossings of the Ohio River between Kentucky and Indiana.
Mr. Trump had pledged on the campaign trail to spend $1 trillion over 10 years on a variety of infrastructure projects if elected, and analysts said this could ease the passage next year of a spending bill already being considered by Congress.
“The GOP Congress is likely to work with Trump to pass a budget reconciliation bill that includes major tax and health-care changes, and the president-elect is probably going to want an infrastructure component as well,” said Loren Smith at Capital Alpha Partners LLC, a Washington, D.C.-based consultancy.
The prospect of more federal and state spending drove shares in engineering and construction specialist Aecom almost 13% higher, and rival Jacobs Engineering Group Inc. closed up nearly 10%.
Suppliers of concrete, sand and gravel soared in heavy trading, with Vulcan Materials Co. and Martin Marietta Materials Inc. ending up 10% and 12%, respectively. Companies that make construction equipment, cranes and other machinery also jumped, led by a 14% rise at Manitowoc Co. and a nearly 15% increase by Terex Crop.
“Upgrading the infrastructure we have, and advancing what’s necessary to meet the demands of new growth will require national support for alternative delivery methods, including public and private partnerships.’’ Aecom Chief Executive Mike Burke said in prepared remarks.
Mr. Trump has previously said he would look to a system of tax credits to finance
upgrades to roads, bridges, airports and other infrastructure, leveraging them to create public-private partnerships to fund proposed work.
Establishing a framework for those partnerships as well as securing a revenue source for the government’s share “would likely delay project starts, though the eventual spending could be significant,” said Ann Duignan, an analyst for J.P. Morgan Chase.
Options to boost revenue include relaxing restrictions on road and bridge tolls so that
big projects have a stable stream of funds to back debt issues and attract equity investment.
“There is currently sufficient capital in the market. What we are lacking is sufficient revenues to support investment in more projects,” said Stephen Howard, head of Infrastructure and Project Finance at Barclays PLC.
The U.S. spends about $1.1 trillion a year on construction of all types. Infrastructure
work—such as repairing or building roads, bridges and sewers—accounts for about $150 billion. Mr. Trump has suggested his infrastructure program could increase that amount by at least 60% a year.
Machinery industry analyst Frank Manfredi at Manfredi & Associates said the
additional spending wouldn’t necessarily result in similar increase in sales of
bulldozers, excavators and other earth-moving and construction equipment.
“It’s going to be very difficult to draw a correlation between spending on one type of construction and spending on machinery,” he said.
Mr. Trump only identified one specific project while on the campaign trail, a
controversial border wall with Mexico.
“If the wall were to be built, then we would of course be prepared to supply building materials for it,” said a spokesman for Germany-based HeidelbergCement AG.
— William Wilkes contributed to this article.
Source: The Wall Street Journal