Construction equipment and contracting executives from publicly owned companies offered investors optimism in their 2019 market outlook at a Credit Suisse investment conference last month in Miami. The mining sector’s continuing upward momentum in the next year and big overseas energy contracts set to be awarded are highlights, even with capacity and other risk factors looming.
“Infrastructure, nonresidential and energy spending continues to drive healthy demand for construction equipment in the U.S. which is expected to continue into 2019,” said Jamie Cook, lead Credit Suisse analyst for the sectors, in a Dec. 3 note. But she noted a mixed outlook for the China equipment market, noting that Caterpillar dealers “remain positive, though suppliers are more cautious.”
Relating comments from design and construction executives, she said they predicted several large petrochemical and LNG project awards made in Canada and Mozambique “by year-end and into 2019.” Gas pipeline construction is set for “multiyear growth into 2020-21,” said Cook, with wireless and wired infrastructure investment accelerating in the second half of next year and mining sector awards picking up by midyear “following a strong year in 2018.”
She notes that "despite the recent pullback in commodity prices, customers are not yet changing timing on [final investment decisions], however the timing of projects is always at risk, in particular given the increased size and complexity of awards."
The outlook is set to take a toll on industry's project delivery, warns Cook. “Capacity constraints remain a concern and contractors remain focused on sequencing of projects and project selectivity in order to meet demand,” she said.
Despite the optimism, some 44% of investor attendees at the conference were bearish on the industrials sector in 2019 compared to the rest of business, while 31% were bullish and 25% neutral.
Nearly half said companies should set their primary corporate focus on better margins next year, with 36% citing cash management and 16% noting growth.
More than 54% of investors said they agreed with Credit Suisse’s outlook for “robust” industrial sector merger-and-acquisition activity next year, with 46% disagreeing. Also, about 57% of investors said there will be more “big breakup” transactions next year/
More than 78% of investors predicted the economy will neither improve or get worse but 49% say the S&P 500 index will rise next year.