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Economics Pulse: Construction materials update
The second quarter of 2015 was largely positive for the construction materials sector. Summit Materials is performing well in the public market place, stock performance has improved and volume indications are on the rise owing to the private sector. The one unknown that remains is whether Congress will produce legislation to address the long-term funding of our nation’s highway infrastructure. Summit Materials’ stock has performed very well, through the end of June. It’s up more than 20 percent in its first three months of trading. The company’s management team remains quite proactive in the acquisitions market and has a notable piece of the Holcim/Lafarge divestiture program with the purchase of seven terminals located along the Mississippi River. CM Index stock performance While the index remains behind the broader market over a 10-year period and one-year period, the CM Index companies have vastly outperformed the broader market over the past six months. The successful IPO of Summit Materials, approval of the Holcim/ Lafarge merger and belief that a highway bill would come out… Keep Reading
Economics Pulse: Construction materials update
The first quarter of 2015 brought four areas of interest to the construction materials sector: year-end earnings reports; the first initial public offering in the sector in more than a decade; continued anticipation of the industry’s merger of its two largest players; and the continued ineptitude of Congress to act on federal funding for highways. Public company performance The Construction Materials Index (CMI) in Figure 1 for a 10-year period, Figure 2 for the 12 months ended March 31, 2015, and Figure 3 for 2015 year-to-date shows the performance of CMI versus the market as a whole for the relative period. The CMI underperformed the market as a whole over the 10-year and 12-month periods, but significantly outperformed the overall market in the first quarter of 2015. The sector is coming off modest improvements in 2014 and a sense of improved optimism for 2015. Figure 4 presents select operating metrics for the CMI companies for the 12 months ended Dec. 31, 2014, while Figure 5 presents the composite EBIT and… Keep Reading
Economics Pulse: Construction materials update
Last year proved to be a year of mixed results for the construction materials sector. Production volumes increased in 2014, but not at the pace that many expected. Sales increased but profit margins struggled to show improvement. Stock prices for the sector’s public companies had an impressive start to the year but lagged the Dow Jones Industrial Average and S&P 500 for the year. The sector benefited from continued increases in both residential and nonresidential construction spending. At the same time, federal spending on transportation continued its nearly flat trajectory and received only short-term funding commitments. The sector is poised for significant growth; however, that will have to wait until the funding challenges at both the federal and state levels can be resolved. The Construction Materials Index (CMI) shown here presents the stock performance of the sector’s publicly traded stocks over a 10-year period (Figure 1) and for 2014 (Figure 2). As shown, the sector was one of Wall Street’s darlings during the residential construction boom (2004-2007), far outpacing the… Keep Reading
