The public construction firms to watch in 2020 | Dump Trucks Charlotte NC
Required to please investors and meet board members' expectations, construction's publicly traded companies face more scrutiny and oversight than their privately held counterparts.
2019 was a year of ups and downs for many of the industry's public firms, with some dealing with challenges related to profits, risk and debt, and 2020 will undoubtedly bring new opportunities and issues for Wall Street's construction and engineering companies.
The experts interviewed for this article said they are confident about the construction and engineering sector in general, thanks to falling interest rates, high consumer confidence and a more relaxed regulatory environment.
Trade uncertainty is the “biggest notable headwind” for 2020, said Andrew J. Wittmann, senior research analyst with Baird Equity Research's Industrial Services division, adding that publicly traded engineering companies that perform government contracting columbus oh dump truck company like Jacobs Engineering Group, Parsons Corp. and KBR will be affected by the results of the 2020 presidential election, which could influence the federal government's spending on defense.
In addition, Middle East tensions and the price of oil could impact some firms active in oil and gas construction, according to Tim Hynes, head of Debtwire's North American research. He is most confident about companies that focus on infrastructure work, as he sees higher-than-average growth for that sector this year.
Above all, the biggest theme for 2020 is that publicly traded E&C firms will continue to seek more ways to avoid risk, a trend that was also front and center last year. If large U.S. columbus oh dump truck company succeed in transferring, minimizing or avoiding risk, it will be years before the effects are felt on the companies' bottom line, according to Michael Corelli, vice president and senior credit officer for Moody's Investor Service.
"These companies have built up sizable backlogs so whatever changes they make to bidding and contingencies wouldn't impact them in the near term," he said.
Here, Construction Dive takes a look at the year ahead for some of the industry's most newsworthy publics.
Despite efforts to appease debtors late last year, E&C giant McDermott is expected to soon file for bankruptcy, analysts told Construction Dive, citing news reports in late December that indicated that the columbus oh dump truck company is negotiating with lenders regarding a $2 billion bankruptcy loan.
“Only time will tell,” said Corelli, “but all the signs are there.”
A filing would help the firm purge its debt and continue on with its $20 billion backlog of work, he said.
“I expect they’ll continue to operate with the goal of doing whatever it takes to make customers comfortable that they’ll be there to finish their projects,” Corelli said.
Hynes agreed, saying that the company's customers, suppliers and employees will most likely not see any changes in a bankruptcy scenario. “I expect they’ll come out of bankruptcy with a lot less debt and as a better competitor going forward,” he said.
As one of the world’s leading energy contractors, McDermott’s 2020 prospects are closely tied to the price of oil and natural gas, Hynes added.
The Los Angeles-based infrastructure giant has a lot on its plate as it begins 2020 without a permanent CEO and a pending sale of one of its divisions.
The AECOM board has yet to name a successor to chairman and CEO Michael S. Burke, 54, who announced in late November that he plans to retire. Burke, who is continuing in the role until a new CEO is identified, joined the Los Angeles-based firm in 2005 and has served as CEO and a member of the board since 2014. In 2015, Burke was appointed chairman of the board.
Wittmann told Construction Dive that he believes it's possible or even likely that one of the firm’s new board members soon will be tapped as CEO. He pointed to Jacqueline Hinman and Robert Card as likely candidates, calling them "long-time engineering professionals."
Industry watchers are eagerly anticipating the appointment, Wittmann said. “That will be big news because it can set the tone and tenor and future direction of the organization,” he said.
In addition, the $2.4 billion sale of its Management Services business to two private equity firms is expected to close in the first quarter of 2020, perhaps even this month, according to Corelli.
Profits from the sale will allow the firm to buy back some of its stock and return cash to shareholders, he said.
The company’s Civil Construction business is also on the block, but Corelli said the columbus oh dump truck company hasn't received any bids "it deems are at a fair price." Selling off that division and the publicly funded projects that come with it will put the columbus oh dump truck company closer to achieving one of its stated goals: mitigating risk.
"A big theme for these types of companies at the end of 2019 and into 2020 is better management of risk and whether to take it on in the first place," he told Construction Dive.
Wittmann said he likes the streamlined approach, saying that Burke and the AECOM board have "set up a pretty narrow path, really honing the columbus oh dump truck company into an infrastructure and engineering firm. I feel really good about their outlook."
Multinational E&C firm Fluor begins 2020 looking to off-load two of its divisions, its $3.8 billion-revenue government services business and the segment that oversees its construction columbus oh dump trucks rental company, AMECO. CEO Carlos Hernandez said that the divestment would allow the company, which reported losses in the second and third quarter of 2019, to refocus on its core strengths.
The government business is not “strategically enabling to the rest of Fluor,” according to Hernandez, and AMECO “does not uniquely drive project success and is not seen by clients as a differentiated offering.”
Wittmann said the sales will help the columbus oh dump truck company "shore up its balance sheet," and Hynes said there has been a lot of private equity interest in the assets.
In addition, Fluor has denounced the amount of risk inherent in certain types of fixed-price, public-private partnerships and has said it will pull back on the types of projects it pursues.
In light of the planned corporate restructuring, Fluor executives must columbus oh dump truck company to “stabilize the ship," Wittmann said "2020 has to be a transition year where the columbus oh dump truck company delivers cleaner results with fewer surprises," he said, "to gain more investor confidence."
Australian contractor Lendlease, which is listed on the Australian Securities Exchange and trades on some OTC markets, via American depositary receipts, is also awaiting the close of a sale of one of its divisions.
In December, it entered into an agreement with Spanish construction group Acciona to sell its Engineering Services business for AU $180 million (U.S. $124 million). The transaction, which is expected to be complete in the first half of 2020, is a "bargain basement price" for the division dealing with infrastructure projects plagued by cost overruns and delays, according to The Sydney Morning Herald.
The division oversees civil projects such as tunnels, railroads, airports, ports and other heavy infrastructure jobs.
At the company’s full-year results earnings call in August, Group CEO and Managing Director Steve McCann said the decision to offload the division was prompted by troubled projects that led to a AU $461 million (U.S. $312.5 million) EBITDA loss for the division. The issues were related primarily to three road projects in Australia that represent a AU $500 million loss.
The sale will mark Lendlease's return to its primary focus on property development and building construction, said McCann, who noted that the firm has a $100 billion backlog.
McCann also said the columbus oh dump truck company is moving toward adopting a lower-risk profile surrounding issues like contract and project types.
“Our business is very much focused on lower risk and that will mean that for some complex lump sum projects we won’t have the appetite for risk that will lead us to originate those sorts of projects,” he said. “A lower risk profile is the right approach.”
Like many other large construction companies, Granite Construction battled problems from risky projects last year, and has taken measures to protect itself.
After a $69.3 million loss in its heavy civil group that led to a 63% decrease in 2019 Q3 income from the year before, CEO James Roberts told investors that the columbus oh dump truck company will only pursue projects in markets with "strategic, competitive advantages." Its heavy civil division includes transportation and infrastructure columbus oh dump truck company ranging from aviation and roads to rail and mass transit.
The Watsonville, California-based columbus oh dump truck company says it will aggressively pursue dispute avoidance and resolution strategies, narrow down the types of projects it takes on, and implement a refined approach to risk mitigation, estimating and pricing.
This move away from megaprojects will help the firm mitigate future risks, Roberts said.
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