TRG | The Bottom Line – 4/30

What a difference a year can make! Last year at this time TRG had published a series of hefty Capital Structure Review reports, focusing on covenant sensitivity analysis, obligation analysis, liquidity and free cash flow flexibility for TRG’s universe stock coverage. Q1’20 earnings season painted a picture of double-digit volume declines, a fragile outlook, and draconian cost cutting measures across the board as the nation, over a month into lockdown, started to see the full financial impact of COVID-19. As NYC announced this week it’s plans to reopen July 1st,  Q1’21 earnings paints a vastly different story. Volumes and outlooks are robust, inflation is a the new reality, and companies are flush with cash, focusing on how to manage growth. Looking forward to next week’s earnings, we will see how heavy materials companies (MLM, VMC, USCR, SUM) are managing not just solid private construction trends (residential & non-res, spurred by deurbanization/population movement) but also better understand how a potential boost in infrastructure spending impacts planning. Cement is already on allocation in several markets, a trend we don’t see getting better as we head into the spring/summer construction season.