Sunday, June 29, 2008

The Economist: "The Cracks are Showing"

Here's the latest in a series of editorials and op/eds that have appeared in various papers this year on the sorry state of American infrastructure, this time from The Economist: Infrastructure: The Cracks are Showing. The Economist piece repeats the startling estimate from the American Society of Civil Engineers, that $1.6 trillion will need to be spent over five years just to maintain the adequacy of our current infrastructure in the U.S. It also quotes a union president estimating that "47,500 jobs will be created for every $1 billion the government spends on infrastructure."

There you have two reasons to bet on a significant increase in federal spending on infrastructure in the U.S. over the next few years:
  • We need it.
  • It will create jobs (which can help replace the ones lost in residential construction and other industries hit by the real estate and credit busts).
There are also the benefits that increased infrastructure spending will stimulate the economy in the short term and potentially increase the productivity of the economy over the longer-term.

What companies might benefit from this macro trend in U.S. infrastructure spending when it comes? One may be Perini Corp., (PCR), a Magic Formula company I invested in earlier this year (perhaps a little too soon). Here's a link to a description of Perini's infrastructure subsidiary, Perini Civil. Massachusetts-based Perini Corp.'s merger with Tutor-Saliba (announced via this press release in April) will result in a combined company with a presence in infrastructure from coast to coast. From the April press release:

"Perini’s civil construction projects include portions of the Boston Central Artery/Tunnel project ($650 million); New Jersey Light Rail Transit ($142 million) and rehabilitations of the Triborough, Williamsburg and Whitestone bridges in the New York City area ($443 million). In addition, Perini has started work on the Harold Structures mass transit project in Queens, NY ($139 million) and express toll lanes along Route 95 in Maryland ($87 million)."


"Tutor-Saliba’s major ongoing and completed building projects include the Las Vegas Wynn Encore Hotel ($1.3 billion); the San Francisco International Airport reconstruction ($1.1 billion); the UCLA Westwood Hospital ($537 million); Planet Hollywood Towers in Las Vegas ($490 million) and the Los Angeles Police Headquarters building ($234 million)."

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