Donald Trump's victory on Tuesday could result in one of the country's biggest infrastructure spending programs, and the potential for infrastructure revenue growth sent shares in Freeport-McMoran (NYSE: FCX), Cliffs Natural Resources (NYSE: CLF), and Manitowoc (NYSE: MTW) soaring higher. All three companies are uniquely tied to construction, and each is arguably a bargain-bin buy. Let's take a closer look to see if these companies might be right for your portfolio.
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IMAGE SOURCE:MICHAEL VADON VIA FLICKR.
Copper, gold, and oil and gas
Following what's proved to be a painful $20 billion M&A splash into the oil and gas market, Freeport-McMoran is paying down debt, and that could position it perfectly if Congress embraces Trump's infrastructure spending plan.
Freeport-McMoran's crushing debt load has made the company's attractive copper and gold assets far less intriguing to investors; however, the company's reduced its net debt to $18 billion and management thinks that asset sales, cash flow, and money raised from stock offerings could get that number to $10.7 billion, or less, by the end of next year.
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Paying down its debt and improving its financial flexibility could make this stock a big winner ifcommodity prices, including oil and gas, jump because of Trump's infrastructure projects.That thinking may be why industry watchers have boosted their 2017 EPS forecast to $1.14 from $1.08 over the past 90 days, and why investors sent Freeport-McMoran's shares jumping 14% in the two days following Trump's election.
Admittedly, Freeport-McMoran's attempts to right-size itself might fall short, but the company is already profitable, and tailwinds from commodity price increases makes this stock one that I think has a better shot at going higher, not lower, now that Trump has won.
Iron ore for steel production
A commodity price bounce would also be good news for Cliffs Natural Resources' investors. Cliffs Natural is the country's biggest producer of iron ore pellets used in steel production, and Trump's campaign promise to support U.S. steel markets could mean that demand for Cliffs Natural's pellets is about to soar higher.
Similar to Freeport-McMoran, Cliffs Natural's shares have struggled in the past couple years because of tepid economic growth, but the company's been shaving debt and cutting costs to improve its income statement, and that means it's in a better position to drop sales to its bottom line when times get better. In the past year, thecompany has managed to reduce its net debt by $500 million to $2 billion, and that's led to a corresponding 21% reduction in its net interest expense.
Industry analysts think Cliffs Natural can deliver earnings of $0.46 per share next year, and while that would be down from $0.77 this year, analyst forecasts could improve rapidly if U.S. steel consumption jumps. For long-term perspective, consider that it was only five years ago that this company was generating EPS of over $11.50.
IMAGE SOURCE: MANITOWOC.
Cranes for building bridges, roads, and ports
Manitowoc's investors haven't had a lot to cheer about lately, but that may not be the case for much longer if Trump can persuade Congress to play ball on his building plans for roads, bridges, and ports.The 114-year-old company's cranes are used to help construct energy, utility, industrial, and infrastructure projects.
Manitowac's business model lands it square in the middle of Trump's plans, and investors sent the company'sshares soaring 27.6% higher over the past few days. Clearly, optimism that crane demand could spike is more than offsetting worry that the company's tumbling sales and profit last quarter will continue indefinitely. In Q3, Manitowac's net sales fell to $349.8 million from $438.2 million last year, and its non-GAAP net loss was$38.1 million, or$0.28 per share. In the same quarter last year, the company lost $29.8 million, or $0.22per share.
Management has some work to do to get this company back in the black, but there's evidence that it's taking steps in the right direction. In August, it announced a restructuring plan that it claims will generate at least $25 million in annual pre-tax savings, and earlier this month, CEO Barry Pennypacker said the company's on target to deliver double-digit operating margin by 2020.
If Pennypacker delivers on his goal, then improving margins and Trump tailwinds could put this company in a much better position in the next four years.
Looking to the future
Budget-conscious members of Congress may try to block Trump's infrastructure plan, but Trump's ability to overcome opposition in the past suggests that it might not be wise to bet against him. If Trump can strong-arm enough support from his party and persuade infrastructure-friendly Democrats to back his plans, then I think Freeport-McMoran, Cliffs Natural Resources, and Manitowoc could generate big gains for investors over the next four years.
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Todd Campbell owns shares of Cliffs Natural Resources and Freeport-McMoRan Copper and Gold.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.
The Motley Fool owns shares of Cliffs Natural Resources and Freeport-McMoRan Copper and Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.