According to a study by the Urban
Land Institute, firms that build and
maintain roads, bridges, and other
infrastructure will likely see increased
profits in the near future, thanks to
the United States' need to spend how
much on infrastructure by 2010?
A.) $589 million
B.) $1.0 billion
C.) $1.3 billion
D.) $2.2 billion
E.) $1.6
trillion |
|
Published:
December 16, 2007
The
correct answer is 
(E.) $1.6 trillion
A 2007 study by the Urban Land
Institute indicated that the U.S.
will need to spend that much by 2010
on aging roads, bridges, and
water-related infrastructure. This
spells unprecedented profits for the
firms that do the planning and
construction of such projects.
In fact, some investors may not
realize the construction boom that
is ongoing in the United States,
since much press is devoted to the
sagging housing market. Millions of
investors routinely ignore the
"other side" of the construction
business -- non-residential
construction. The firms that build
power plants, roads, bridges, water
treatment facilities, and even
commercial office buildings are
still seeing great growth.
But an important thing to remember
about non-residential construction
is that its demand has little to do
with the housing market. For
example, state, local, or even
federal governments typically
finance roads -- this means that
spending often remains steady, even
during recessions.
Companies in several sectors of the
non-residential construction
industry are particularly
well-positioned for the coming
windfall of government spending. For
instance, the demand for power is
growing both in the U.S. and abroad,
which is creating a seemingly
never-ending demand for new power
plants, including traditional
coal-fired facilities, hydroelectric
projects, and modern nuclear plants.
Likewise, U.S. roadway construction
spending rose sharply from 2005 to
2007 as local and federal
governments tried to tackle the
nation's gridlock problems. In
addition, the devastating collapse
of the I-35 bridge in Minneapolis
during the summer of 2007 drew
attention (and repair efforts) to
the 75,000 other bridges nationwide
that were certified as "structurally
deficient." That means big spending.
Another infrastructure sector seeing
big spending is water. Cities deal
with contaminated water every year,
and aging pipes and reservoir
systems waste water and worsen
drought restrictions. To boot, a
whopping 3,500 dams in the country
are considered inadequate and
potentially unsafe.
With all of these points in mind,
the companies that build and design
infrastructure projects stand to benefit from a
wave of spending in the coming years
-- but some sub-sectors (and some
companies) will benefit more than
others. In a recent issue of the
premium
StreetAuthority Market Advisor
newsletter, Editor Paul Tracy and
his staff took an in-depth look at
two favorable plays in the
infrastructure construction boom.
Both of these firms have earnings
growth rates of over +12% and
provide a perfect way to benefit
from the $1.6 trillion that needs to
be spent. To learn
the names of these companies, and to
learn more about the
Market Advisor newsletter,
please
visit this link.
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