Mr. Fisher: I'd say the major themes are still intact from when we spoke a year ago. You've got global economic growth generally above average, supportive commodity prices, significant long-term needs for reinvesting in energy and transportation infrastructure, major environmental spending needs, shortages in engineers, field labor and materials in many places, and favorable terms and conditions for engineering and construction firms. But the things that have changed are mostly on the US side. As you pointed out there are some crosscurrents, like a weaker US economy and recession fears driving shortfalls in state and local government budgets; combine that with higher commodity prices, and we think that's going to cause some weaker spending activity in highway construction and certain water projects. Also the slowing US economy is driving a weaker outlook in non-residential construction. But as we look globally, our message to clients is to go where the money is and that's in international markets as well as oil and gas. There are some domestic energy markets that we think are still favorable; that's the message we're going with today.
TWST: How important is international to the public companies at this point?
Mr. Fisher: It varies from company to company. There are some that have the
majority of their business internationally and some that have just a minority.
So that's how we're starting to parse our recommendations. In our coverage, the
most international would be a company like KBR (KBR), which has north of 70% of
its business outside the US and that's excluding their work in Iraq. If you
include the work in Iraq, it would be even higher than that. On the other end
you have a company like Perini (PCR), which has the majority of its revenues,
almost 95% of its business, in the US. URS (URS) would probably be somewhere
around 90% domestic as well.
Tickers included in this excerpt: FLR, JEC, KBR, LAYN, PCR, SGR, URS, WG
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.