President Joe Biden signed the more than $1 trillion bipartisan infrastructure bill into law on Monday, successfully establishing part of his administration's vast economic agenda--called Build Back Better--to help the U.S. continue to recover from the coronavirus pandemic and rebuild the its economy to better benefit the working class.
"My message for the American people is this: America's moving again, and your life's going to change for the better," Biden said during remarks at the White House.
Biden's signature follows years of failed efforts in Washington to pass legislation to improve the nation's overall infrastructure. The spending package--formally known as the Infrastructure Investments and Jobs Act--is expected to help support the overall economy and create jobs.
Here are the major elements of the spending package:
The leading legislation behind the bill is the $110 billion set aside for roads, bridges and other major vehicle transportation projects. The package will also invest $66 billion in freight and passenger rail, including possible upgrades to the nation's Amtrak system. The bill also direct $39 billion into other public transit systems across the United States, $25 billion for airport maintenance and improvements, and provides $1 billion to reconnect inner-city neighborhoods that were divided by freeways and other transportation lines.
Another larger part of the bill allows for $65 billion in spending to expand the nation's broadband infrastructure, which has become a priority for the Biden administration in the wake of the coronavirus pandemic as millions of Americans were left with inadequate internet access during quarantine.
The spending bill also aims to help the nation upgrade its infrastructure in response to climate change. These new measures include $73 billion towards electrical grid improvements; $47.2 billion towards national infrastructure resilience--including flood and wildfire mitigation, ecosystem restoration, weatherization and cybersecurity--$21 billion towards cleaning up polluted sites, reclaiming abandoned mines, plugging oil and gas wells; $7.5 billion for electric vehicle chargers; and $7.5 billion for electric school buses, low-emission buses and ferries.
The package also plans to upgrade much of the nation's water infrastructure with $55 billion in spending. Moreover, the bill allows for $17 billion towards port and waterway improvements.
Funding will extend over a five-year period, with major projects projected to take months or even years to fully begin.
Looking ahead for the construction industry:
According to Jefferies' analyst Philip Ng, the construction materials stocks Martin Marietta Materials (NYSE: MLM), Vulcan Materials (NYSE: VMC), Eagle Materials (NYSE: EXP), Summit Materials (NYSE: SUM) and WillScot Mobile Mini Holdings (NASDAQ: WSC) are set to benefit from the increased government spending.
"The bill increased highway funding by 50% over the next five years, and we estimate it could increase [aggregate shipments of construction materials] buy ~9% over five years from late 2022/early 2023," Ng wrote in a recent note to clients, quoted by MarketWatch.
The stocks are expected to have increased compound annual growth rates (CAGR) through 2023 and 2024, with Martin Marietta and Vulcan forecasted to be in the double digits, according to Ng. In comparison, the two-year expected sales CAGR for the S&P 500 (NYSE: SPY) is expected to be 5.8% through 2023, according to FactSet. Moreover, for the S&P 500 construction materials industry, the two-year sales CAGR is expected to be 14.8%, with Martin Marietta and Vulcan expected to match or beat that estimate.
Additionally, the companies are expected to achieve high double-digit growth rates for their earnings per share (EPS) through 2024, according to FactSet, with WillScot Mobile Mini and Summit outperforming with as much as 39% and 24% forecasted growth, respectively. In comparison, the S&P 500's expected two-year EPS CAGR through 2023 is 8.7%, and 20.6% for the benchmark's construction materials industry.