Shares of Vulcan Materials rose 3 percent Wednesday on expectations for increased highway and repair spending in California.
Vulcan, one of the nation’s largest producers of construction aggregates, could benefit from California roadwork funding, according to a research note Wednesday from SunTrust Robinson Humphrey analyst Rohit Seth.
SunTrust said measures under consideration in California would raise highway funding to as much as $6 billion per year, up from $2 billion.
Vulcan stock closed up $3.56, or 3.1 percent, at $118.16. In trading Wednesday, the stock touched as high as $118.78, before giving up some of its gains.
“We think the mounting backlog of needed highway and road repairs ups the urgency level in this state, particularly after heavy rainfall this quarter brought the issue to the forefront,” said Seth. He estimates that California accounted for about 15 percent of Vulcan’s total sales in 2016 and would be around 20 percent of revenue if not for reduced funding due to budget cuts
Also higher was aggregates supplier Martin Marietta Materials, which gained $4.35, or 2.1 percent, to $214.27.
Although Martin Marietta isn’t a big player in the Golden State, having exited its cement business, it was mentioned along with Vulcan in a note from Citi Wednesday that initiated “buy” ratings on the two stocks.
Citi suggested they both “present strong investment cases at current prices particularly after the [President Donald] Trump rally fade.”
Citi analyst Scott Schrier added, “Martin and Vulcan suggested they will be more active in the
M&A market, and not rely solely on bolt-ons as they have over the last three years.
We think aggressive M&A demonstrates confidence that infrastructure will indeed elongate the cycle.”
Watch: Trump’s infrastructure package