Barclays Estimates Impact of Infrastructure Stimulus on Machinery Stocks

Barclays Estimates Impact of Infrastructure Stimulus on Machinery Stocks – (CAT) (MTW) (TEX)

Barclays believes that the potential for a large infrastructure plan is real. However, details for a plan are still scarce, and the potential for offsetting impacts is very fluid. Using the economic census of construction, analysts are able to estimate the machinery content in various kinds of construction activity, including infrastructure. Barclays analyst Robert Wertheimer commented, “Roughly 8% of the cost of a road is machinery, versus 1-3% of the cost of a house. Dollars spent on infrastructure punch above their weight in driving machinery demand. Water and sewer construction is a similar 8%, versus 3% on a commercial building. We spend months asking various levels of construction contractors these questions at one time, and generally even the general contractors didn’t have a clear view, as many of the costs subcontracted out. We used the once every five years census data to sort through this all, adding up both machinery rental expense and machinery depreciation”

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