Morgan Stanley Sees Companies From Ford to Deere and Nucor Gaining in US Infrastructure Boost

Morgan Stanley has highlighted companies across four sectors — autos and shared mobility, machinery, metals and mining, and transportation — that are likely to benefit the most from a boost in infrastructure spending in the US.

“While prospects for 2018 are dim, we see a policy-driven increase in infrastructure spending as likely over time,” Morgan Stanley analysts said in a note on Monday. “Hence, investors should start studying its implications today.”

The Morgan Stanley economics team outlined three scenarios for US infrastructure spending. Its base case is called Patch Up America and would see infrastructure spending return to the longer-run average share of gross domestic product at a $1.1 trillion package over 10 years.

The bull case is called Rebuild America and involves a $2.4 trillion package, while the bear case, dubbed Let America Erode, involves no spending plan and a drag from the country’s aging infrastructure growing more acute.

In autos and shared mobility, Morgan Stanley highlighted Ford (F), General Motors (GM), Fiat Chrysler (FCAU), Harley-Davidson (HOG) and American Axle (AAL). The analysts noted that infrastructure spending will benefit original equipment manufacturers “primarily through the sales of the highly profitable pickup truck segment.”

In machinery, United Rentals (URI), Deere (DE), Caterpillar (CAT), Terex (TEX), and Cummins (CMI) are standouts. “The clearest beneficiaries are construction equipment companies over-indexed to North America with more overall revenue exposure to US construction,” Morgan Stanley said.

In transportation, Old Dominion (ODFL), Schneider National (SNDR), Knight-Swift (KNX), Werner Enterprises (WERN) and XPO Logistics (XPO) were highlighted. In metals and mining, the companies singled out were Commercial Metals (CMC), Nucor (NUE), Steel Dynamics (STLD) and AK Steel (AKS) as steel producers benefit when construction activity increases, Morgan Stanely said.