Every 4 years the American Society of Civil Engineers (ASCE) puts out a report on the cost of repairing existing infrastructure. The most recent report, just released, said it would cost almost $4.6 trillion over the next 8 years to bring all those systems up to an acceptable standard.
President Donald Trump has pledged $1 trillion. Many in Congress seem eager to respond favorably, but politicians have yet to write a check.
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Grading The Problem
ASCE gave U.S. infrastructure an overall grade of D-plus. That’s the same grade the country received in 2013. In other words, there has been no real progress over the last 4 years.
Airports, which received a D from ASCE are congested. Four in 10 of U.S. bridges (C+) are more than 50 years old and near the end of their life span. Most of the rest of the components including dams, drinking water, electricity, roads and transit systems receive a D or lower. Only ports (C+) and railroads (B) did better.
Paying The Bill
President Trump’s proposal, while less than a quarter of the funds needed would go a long way toward addressing the problem. Unfortunately, Congress and the American people have to agree to pay for it.
According to the ACSE if lawmakers were to raise the federal gas tax by $0.25 per gallon and index it to inflation that would go a long way toward improving sustainability. Some sort of public-private partnership seems to be behind the president’s proposal.
Former Pennsylvania governor, Ed Rendell took issue with that strategy saying, “We can use private financing for the major things, but it’s a slice of investment.”
The Big ‘If’
If President Trump gets his way and Congress agrees to a massive expenditure or is able to forge a workable public-private partnership, companies that operate in the infrastructure space stand to do well – as do investors who pick the right stocks to own.
Following the president’s recent speech to Congress, Caterpillar Inc. (NYSE:CATB), United States Steel Corp. (NYSE:XC) and Vulcan Materials (NYSE:VMCC) all did well in initial trading with CAT up 2%, U.S. Steel +2.5% and Vulcan gaining 3.1%.
Others In The Mix
Among other stocks frequently mentioned as potential winners in a pro-infrastructure spending environment are architecture and engineering design services company AECOM (NYSE:ACMC), Chicago Bridge & Iron Co. N.V. (:CBIN/A), Fluor Corp. (NYSE:FLRA), based in Irving, Texas, Jacobs Engineering Group Inc. (NYSE:JECB), KBR Inc. (NYSE:KBRC), a Houston company that could see a double win in the event of both infrastructure spending and a military buildup, Martin Marietta Materials Inc. (NYSE:MLMC), which supplies aggregate products and heavy building materials for the construction industry, Tetra Tech Inc. (NASDAQ:TTEKC), and oil and gas equipment supplier, United Rentals Inc. (NYSE:URIB)