CRH, Kingspan set for boost from rise in eurozone infrastructure spend - Goodbody
Irish building-materials firms CRH and Kingspan look set for a boost from a eurozone-wide uplift in infrastructure investment, according to Goodbody Stockbrokers.
A report by Goodbody chief investment officer Bernard Swords said recent political developments were likely to provide further impetus for infrastructure spend, which was moving towards growth in any case. Swords named CRH and Kingspan as stocks for which this was positive.
The report, entitled 'Euro area on the turn', said there had been a consistent improvement in the eurozone's economic data through the last quarter of 2016 and early 2017. "While the growth rate may not be stellar, it is significantly better than the average over the last four years. Expectations are that the region's economy will grow by 1.5pc [a year] over the next two years - compared to the average over the last five years of 0.8pc."
"Indications from the start of this year show unemployment declining and business sentiment for manufacturing and service industries reaching post-recession highs. There is the potential that a messy Brexit will impact the region's growth, but that would be a drawn-out affair rather than a shock event." It said the main concern for the region now is France, where a victory for Marine Le Pen in the presidential election would put further pressure on the European Union's structural integrity. An expected pick up in inflation would be good news for companies' sales figures, and continued monetary policy easing from the ECB would put downward pressure on the euro, it added.
Swords flagged Kerry Group as company that would benefit from a stabilisation of economies in the Pacific Rim and a weaker euro, and said it was growing its Asian business with local and international companies.
More generally, the report said 2017 could be the year "we actually see some profit growth in the euro area."
"Currently the forecast growth rate is 12pc, but that is not much different to the last number of years. What is different this year is that the expected growth rate was increased in January."
"Recent results have beaten these increased expectations... prospective earnings still reside over 20pc below the last peak, while US earnings reach new highs. If euro area corporates could mimic their US counterparts, then there is considerable upside in the region's equity market," said the report.
Sunday Indo Business