Congress appears to have avoided a potential government shutdown by agreeing to terms on a spending bill that would fund the government through September. But while a spending deal removes uncertainty from the stock market, Caterpillar Inc. (ticker: CAT) and other infrastructure companies are wondering when President Donald Trump is going to follow through on his plans for aggressive infrastructure spending.
Details on the new spending bill are still vague, but it reportedly contains $1.5 billion in spending for border security and infrastructure repair. Conspicuously absent from the plan is any funding for the construction of a border wall.
Caterpillar, Martin Marietta Materials ( MLM), Chicago Bridge & Iron ( CBI) and other infrastructure stocks initially surged following Trump’s election victory in November. Investors hoped Trump’s $1 trillion 10-year infrastructure spending plan and the construction of the border wall would open the gates for a U.S. infrastructure boom. Three months into Trump’s term, there is still little clarity on these initiatives.
Former Federal Reserve Chairman Alan Greenspan says infrastructure spending is a tough sell because the government sees limited returns on its investment.
“The question is who is financing this trillion dollars in infrastructure,” Greenspan said in April. “At the moment, we can’t afford it… If you go and build a bridge, for example, you don’t get any revenues from that bridge until it’s complete.”
[See: 8 Ways to Profit From Donald Trump’s Infrastructure Plans.]
Fiscal concerns are even more critical in light of Trump’s proposed tax reforms, which would cut income and corporate tax revenue across the board. Still, some analysts are optimistic that Caterpillar will ultimately benefit from a U.S. infrastructure spending ramp during the Trump administration. Over the weekend, Barron’s said Caterpillar shares have an additional 20 percent upside ahead.
“Perhaps no company in the U.S. is better positioned,” Barron’s said of Caterpillar’s prospects if Trump follows through on some version of his infrastructure plan.
[Read: How to Invest in Infrastructure After the Election.]
Even without an infrastructure bill, Caterpillar’s business seems to be firing on all cylinders. Last week, the company reported first-quarter earnings and revenue that easily topped consensus Wall Street expectations. The company also raised its full-year 2017 earnings per share guidance from $2.90 to $3.75.
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Caterpillar Inc. (CAT) Investors Disappointed by Spending Bill originally appeared on usnews.com
