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Why Fluor, Cemex, and Summit Materials Stocks Popped 15% (and More) Today

What happened

Remember the infrastructure bill? This is a song about the infrastructure bill.

Four years ago, companies involved in infrastructure work got a huge lift from the election of President Donald Trump. A well-known builder of hotels in his previous career, it was thought that electing Trump would bring about a new era for American infrastructure, and that the president would move swiftly to get legislation passed in Congress to repair crumbling roads and bridges and build new airports, sewer systems, and other infrastructure.

Four years later, nothing of the sort has happened. But all of a sudden today, shares of infrastructure stocks Summit Materials (NYSE: SUM) (asphalt), Cemex (NYSE: CX) (cement), and Fluor (NYSE: FLR) (engineering) raced out of the gate, closing the day up 20.1%, 16.1%, and 15.6%, respectively.

$2 trillion could build a lot of bridges -- and help a lot of construction stocks. Image source: Getty Images.

So what

Why did this happen? You can read it right here for yourself:

With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4

— Donald J. Trump (@realDonaldTrump)

With the CARES Act stimulus plan flooding the market with money, and interest rates responding by diving to near-zero, the president is calling upon Congress to pass an infrastructure bill as its next act of fiscal stimulus to goose the economy back toward health. And just like the stimulus package passed last week, the president appears to be asking for $2 trillion to fund this stimulus package as well.

Now what

How the government plans to build infrastructure -- an obviously cooperative endeavor -- at the same time as it demands that Americans maintain social distancing and work from home remains to be seen. Regardless, investors are responding to the president's tweet with enthusiasm, and bidding up shares of companies that might benefit from the $2 trillion in government loot.

With Fluor shares trading for roughly five times forward earnings, and Cemex stock under six times forward earnings, there's arguably good reason for investors to get excited about those two. Summit stock, on the other hand, looks less attractive at 21 times forward earnings (and 25 times trailing).

Nevertheless, hope springs eternal. If the government does end up spending another $2 trillion in an attempt to avoid recession, all three of these stocks are likely to benefit.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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