Skip to Content
Stock Analyst Update

What a Proposed Infrastructure Bill May Mean for Stocks

We are maintaining our fair value estimates for these stocks in the basic materials sector.

Mentioned: , , ,

On June 15, Bloomberg reported the Trump administration would soon propose a $1 trillion infrastructure bill. Given that we’ve been including an eventual improvement in infrastructure funding in our valuation assumptions, our fair value estimates have tended to be on the higher end of consensus. As such, we maintain our fair value estimates for narrow-moat Martin Marietta (MLM) of $230 per share, narrow-moat Vulcan (VMC) of $125 per share, narrow-moat Summit (SUM) of $19.50 per share, and no-moat U.S. Concrete (USCR) of $27 per share.

The plan could be particularly beneficial for U.S. heavy building materials companies Martin Marietta, Vulcan Materials, Summit Materials, and U.S. Concrete as most of the money would likely be earmarked for roads and bridges. As we write, these stocks are up 6% or more, with highly leveraged and extreme uncertainty U.S. Concrete up 20%. Given that stocks are again pricing in better funding before it's even passed, we see limited risk-adjusted upside after June 16’s rally.

If the plan passes, the timing for heavy building materials demand would be particularly fortunate for two reasons. First, COVID-19 is likely to threaten near-term nonresidential construction demand, especially for buildings such as new hotels or offices. If a bill were to pass before nonresidential construction demand slowed, the more material-intensive infrastructure end-market would more than make up for any lost demand.

Second, the FAST Act, the $305 billion five-year infrastructure bill passed under former President Obama, is set to expire in September. Passing another multiyear infrastructure program soon would allow national road funding to continue seamlessly.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.