Construction

Caterpillar shows how to dig in mining downturn

27 Jan 2014

The U.S. heavy equipment maker finally beat estimates after several poor quarters. But a commodities recovery to boost mining equipment sales looks a ways off. Cost cuts, a new buyback and a better construction-unit showing give investors something to hold on to in the meantime.

U.S. homebuilder deal heralds two-tiered recovery

7 Nov 2013

A $1.6 bln acquisition by McMansion specialist Toll Brothers marks a timely expansion in California. Years of depressed house sales translate into pent-up demand. Only the very rich, though, will be able to shrug off rising mortgage rates. No wonder Toll’s shares are so pricey.

A long M&A pruning effort sees forest for trees

4 Nov 2013

Weyerhaeuser is offloading its homebuilding arm for $2.7 bln in the latest piece of a seven-year divestiture campaign. The carve-up has refocused the $18 bln U.S. timber company and left it valued at about 20 times earnings. To buy in now would be going out on a limb.

Mud sticks for China’s warring heavy industries

29 Oct 2013

Rivals Zoomlion and Sany have faced accusations of fraud, espionage and even attempted kidnapping. Competition is meant to spur efficiency, but the chronically oversupplied construction machine sector shows that without clear rules and a working market, the reverse can happen.

Market underestimating commodity bust hangover

23 Oct 2013

The end of the 10-year mining super-cycle was bound to cause pain. Yet equipment-maker Caterpillar surprised itself and investors with its fourth earnings miss in a row. The industry leader and rivals are trading at valuations that imply a recovery soon. That’s wrongheaded.

Ferrovial hedges regulatory risk at Heathrow

23 Oct 2013

The Spanish infrastructure group has sold an 8.7 percent stake in the company that controls Heathrow to a top UK pension fund, USS. Ferrovial gets a good price and remains the airport’s largest investor. Bringing in a local partner makes sense for such a regulated asset.

Rare Gulf cash call built on shaky foundations

30 May 2013

UAE contractor Arabtec is seeking $1.3 bln through share issues to fund expansion. The strategy makes sense, but it lacks detail and the newness of the management is a risk. And it’s unclear if the agenda of its big Abu Dhabi backer, Aabar, is aligned with ordinary investors.

U.S. housing is both cheap and out of reach

13 May 2013

It’s one of the few assets that look undervalued as stock and bond prices go through the roof. That’s ironic, considering the Fed’s bond-buying policy was designed in part to prop up housing. But tight lending standards make it hard to take advantage of the opportunity.

Brotherhood faceoff with Sawiris is bad for Egypt

11 Mar 2013

The country’s Islamist rulers have escalated a tax probe on billionaire Nassef Sawiris as he seeks to shift his construction group’s primary listing to Amsterdam. A fight between Egypt and its top entrepreneurial family is the last thing the country needs now.

Homebuilder IPO may add to recovery exuberance

29 Jan 2013

The monthly leap in U.S. home prices and a big quarter from builder D.R. Horton underscore buoyant attitudes about the housing market. Developer Tri Pointe could be capitalizing with a richly valued share sale. Investors should beware getting swept up in premature euphoria.

ACS shows who’s the boss at Hochtief

19 Nov 2012

The Spanish group is purging the top management of Hochtief 18 months after gaining control of the German builder. What makes sense for struggling ACS could endanger its subsidiary’s future. Investors should learn to mistrust promises made in the heat of takeover battles.

Sherwin-Williams deal colors Latam green

12 Nov 2012

The U.S. paint maker is splashing out $2.3 bln for Mexican rival Comex. Expected cost savings are worth about $500 million, and yet the market added almost twice as much to Sherwin-Williams’ value. It’s a testament to optimism about the region despite some signs of sluggishness.

Mexico’s $10 bln cement giant lightens its load

8 Oct 2012

Though expansion weighed Cemex down with debt and losses, the U.S. housing recovery, eager bond buyers and a planned Colombia IPO are now paving the road to recovery. The investment thesis, however, is less than concrete. Cemex is richly valued and dividends still look distant.

Italians railroad China’s PLA on soccer pitch

2 Aug 2012

How else to explain an investment in Inter Milan by China Railway Construction, a state group with origins in the People’s Liberation Army? Bragging rights are limited and industrial rationale non-existent. At best it’s a quid pro quo for the contract to build Inter’s new stadium.

Sacyr faces steep cost of botched diversification

14 Dec 2011

The Spanish construction group must repay by next week the 4.9 billion euro margin loan it took out to finance a 20 percent stake in Repsol. With the investment underwater, there is no easy way to do it. The banks hold the whip, but they will probably have to share some pain.

Rumble in rock garden presages more hostile M&A

12 Dec 2011

That’s one way to read the unsolicited $4.6 bln offer that Martin Marietta Materials made for larger rival Vulcan. The deal won’t succeed without a sweetener. But the lesson is clear: if profits can’t be mined from the ground, they can still be found by cutting costs.

China’s pursuit of stability risks greater stress

20 Sep 2011

Some claim China’s economy is a bubble set to burst while others think slowing growth and inflation warrant looser policy. Ethan Devine of Indus Capital argues that in fact China’s economy is both too hot and too cold, with structural reforms needed to bring it back into balance.

Rising costs may add M&A splash to paint business

11 May 2011

Prices for raw materials like titanium dioxide are surging while pricing power remains weak amid the U.S. housing slump. Rather than watching profits dry, don't be surprised if the likes of SherwinWilliams, PPG and Buffett's Benjamin Moore make deals to crunch out costs.

ACS’s new Hochtief bid is cleverer than it looks

15 Dec 2010

The Spanish construction group has upped its allshare offer for German peer Hochtief by 12.5 pct. It looks pointless. There are no rival bids, and the offer's still below Hochtief's share price. But the move may give underfire Hochtief managers a facesaving way to enter talks.

Rebel Hochtief investor has a strong case

9 Dec 2010

The German construction group's number two shareholder is demanding a boardroom clear out after it sold a 9 pct stake to Qatar. That is extreme. But Hochtief does need to give a convincing explanation for inflicting dilution on investors when it has no obvious need for capital.