European Building Material Companies To Ride US Construction Growth


The Portland Cement Association (PCA) says U.S. construction activity will grow at 1.3%, 8% and 9% during 2013, 2014 and 2015, respectively. Residential construction is poised for especially strong growth, and is expected to increase by 9.3% during 2013, followed by 13.1% in 2014 and 11.5% in 2015. On the other hand, non-residential construction is estimated by PCA to improve by 1.9% during 2013, 7.5% in 2014 and 11.5% in 2015.

Public construction could recover in U.S.

Public construction in the U.S. could recover in 2014 (+3.4%) and 2015 (+2.3%) after bottoming out in 2013 (-5.2%), driven chiefly by unmet demand and better government spending on infrastructure in an improving economic climate.

These are encouraging forecasts from PCA, and are cited by Citi analysts Aynsley Lammin and Ami Galla in their analysis of the impact of U.S. construction on European building material companies.

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Pan euro building material companies to benefit

“CRH, Wolseley, Titan Cement, Buzzi Unicem and Heidelberg Cement are most exposed to the US markets in our sector. In our view, Wolseley remains the best placed to benefit from a sustained construction recovery, particularly the long-awaited recovery in private non-residential,” say the Citi analysts.

Wolseley PLC (LON:WOS)

Citi has a target price of 3,600p on the stock and a rating of 1, considering “the potential for volume recovery, as well as the group’s strengthening balance sheet.” Wolseley is a supplier of building materials across North America, the U.K. and Europe.

Of note, analysts at Deutshe Bank reaffirmed their ‘Buy’ rating on Wolseley plc (ADR) (OTCMKTS:WOSYY) (LON:WOS) last week and indicated a price target of 3,551p.

However, earlier today, analysts at Jefferies Group reissued the stock an Underperform rating and have a price view of only 2,540p.

Wolseley plc (ADR) (OTCMKTS:WOSYY) (LON:WOS) closed at 3,233p yesterday after trading a range of 3,222 – 3,252p. It pays a dividend of 110p at a yield of 2.04%, and has a market capitalization of 8.87B GBP.