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An infrastructure deal really could happen. That could help these companies’ stocks

Find out what Ed Cofrancesco discussed with CNN’s, Paul Lamonica in his latest interview highlighting a potential infrastructure deal that could help company stocks. https://www.cnn.com/2019/09/20/investing/infrastructure-caterpillar-deere/index.html

Ed Cofrancesco discussed with CNN’s

New York (CNN Business) – The idea that President Trump and Congressional leaders might actually cooperate on something may sound absurd.

But as politicians in Washington gear up for the 2020 election season, some think Republicans and Democrats have a good incentive to work together and finally pass an infrastructure bill.

Concerns are growing about China’s economic slowdown, and the trade war is hurting construction equipment giants Caterpillar and Deere.

Shares of Caterpillar (CAT) are up just 2% this year while Deere (DE) stock is up 10%. That’s well below the nearly 20% gain for the S&P 500.

China weakness is weighing on both companies. Still, Ed Cofrancesco, president, and CEO of International Assets Advisory, likes both stocks — in part because investors hope the US federal government will once again turn its attention to an infrastructure bill.

Construction sector showing signs of a slowdown

More funding for infrastructure could also boost blue-collar employment growth in the heartland. That’s needed because the pace of job gains in the construction sector has flatlined in recent months; the sector has added just 31,000 jobs since May.

Also, monthly construction spending in the United States rose at an anemic pace in July, following a drop in spending in June. Year-over-year, spending is still down 2.7%.

Cofranesco argues that a bill that helps boost jobs could be a political–(and economic)–win for both parties.

Executives in the construction materials industry share that assessment.

US Concrete (USCR) CEO Bill Sandbrook said in an interview with CNN Business last month that he was still hopeful that there would be a federal plan that Trump and Congress could agree on to boost infrastructure spending.

Sandbrook added that it is a good sign that the Senate Environment and Public Works Committee (EPW) recently voted unanimously to propose reauthorizing the Fixing America’s Surface Transportation (FAST) Act, which was signed into law in 2015 and is set to expire in October 2020.

That’s a plus for US Concrete and rivals like Martin Marietta (MLM) and Vulcan Materials (VMC). All three stocks have spiked this year.

Local governments giving construction a boost

Martin Marietta Materials CEO Ward Nye has also expressed cautious optimism that Washington will give the sector a boost with an infrastructure bill.

“The debate’s going to be around what funding it’s going to be, but I think we have a president who would like to see it. We clearly have a Democratic Congress who would like to see it, and we have a Republican-controlled EPW that has come out with what we feel like is a very good start,” Nye said on an earnings call in late July.

Sandbrook added that he’s heartened by the fact that many states and municipalities have agreed to boost infrastructure spending recently.

Caterpillar and Deere executives also noted the increase in local infrastructure spending as a positive sign in their latest quarterly earnings conference calls with analysts.

That’s encouraging. But investors are clearly hoping that national politicians can put aside their differences and join states and cities by agreeing to commit more funding for infrastructure.

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