Government Spending: Effects on Infrastructure Stock Performance

Historical Trends in Government Infrastructure Spending

Government infrastructure spending has historically bolstered market health and demand, as seen in increased revenues from large U.S. pipeline projects and non-residential construction. Elevated infrastructure spending continues to support utility modernization programs and offset declines in other sectors, reflecting a consistent trend of government investment driving infrastructure growth.

"Industry fundamentals remain vastly unchanged with stabilized demand supported by visibility into the balance of the year, and markets continue to be healthy as the U.S. government infrastructure spending further increases." --- (DE, earning call, 2024/Q2)

"Underground and Infrastructure Segment Results Revenues . The increase in revenues for the three months ended March 31, 2024 was primarily due to approximately $60 million in revenues attributable to an acquired business, as well as increased revenues associated with large pipeline projects in the United States, which were partially offset by lower revenues from large pipeline projects in Canada." --- (PWR, sec filing, 2024/Q1)

"Construction projects, as well as government related infrastructure, continue to benefit non-residential demand." --- (CAT, earning call, 2024/Q1)

"Benefits from increasing U.S. infrastructure spending, elevated manufacturing investment levels, and improving single family housing starts are expected to partially offset declines in commercial real estate construction and softening rental demand." --- (DE, sec filing, 2024/Q2)

"With respect to our Underground Utility and Infrastructure Solutions (Underground and Infrastructure) segment, during the first quarter of 2024 we continued to experience strong demand for our services focused on utility spending, in particular our gas distribution services to natural gas utilities that are implementing modernization programs, and our downstream industrial services, as customers continued to move forward with certain maintenance and capital spending that was previously deferred." --- (PWR, sec filing, 2024/Q1)

Impact of Major Government-Funded Infrastructure Projects

Government-funded infrastructure projects drive sustained demand and economic development, benefiting companies like Vulcan Materials and Martin Marietta. Despite fluctuations in shipments, increased government contract awards and IIJA funding boost future demand, while projects like Fluor's I-35 corridor enhance regional commerce.

"Therefore, although reductions in state and federal funding can curtail publicly-funded construction, the vast majority of our business is not directly subject to renegotiation of profits or termination of contracts with local, state or federal governments." --- (VMC, sec filing, 2024/Q1)

"Aggregates End-Use Markets While aggregates shipments to the infrastructure market decreased 6%, the value of state and local government highway, bridge and tunnel contract awards, a leading indicator for future product demand, is meaningfully higher year-over-year." --- (MLM, sec filing, 2024/Q1)

""This project reinforces Fluor's commitment to deliver quality infrastructure and supports economic development and commerce in Texas." The I-35 corridor is one of the most traveled interstates in Texas and serves more than 150,000 vehicles per day." --- (FLR, press release, 2024/05/16)

"Additionally, other public infrastructure activity, which benefits from IIJA funding is growing faster in Vulcan states than the country as a whole." --- (VMC, earning call, 2024/Q1)

"This generational investment in our nation's infrastructure supported by federal, state, and local actions provides State DOTs with certainty to advance projects in their backlogs, driving sustained multi-year demand in this aggregates-intensive, often countercyclical market." --- (MLM, earning call, 2024/Q1)

Financial Performance of Infrastructure Companies

Infrastructure companies are demonstrating robust financial performance, with Deere & Company and Caterpillar reporting improved results and record profits. Quanta Services highlights enhanced cash flow and consistent financial outcomes, while Fluor notes exceptional joint venture performance. Overall, these companies are achieving better-than-historical financial results.

"Notably, our projected financial performance in these dynamic market conditions demonstrates our ability to deliver better results across the business cycle." --- (DE, earning call, 2024/Q2)

"Our diversity and portfolio approach has also improved our cash flow profile and positions us well to allocate resources to the opportunities we find most economically attractive and to achieve operating efficiencies and consistent financial results." --- (PWR, earning call, 2024/Q1)

"David Constable : Thanks for the question. It's David. So we said at Fluor is probably -- as you look historically across the company, Fluor, I would say, our best joint venture from a performance standpoint that we've had in the company." --- (FLR, earning call, 2024/Q1)

"So turning to slide 18, let me summarize. The strong operating performance continued in this quarter, with the adjusted operating profit margin at 22.2%, and record adjusted profit per share of $5.60." --- (CAT, earning call, 2024/Q1)

"Overall, our earthmoving and road building segments continue to deliver structurally better financial performance than we've seen historically." --- (DE, earning call, 2024/Q2)