Industrial and Construction Services Newsletter - Q2 2020

TKO Miller Market Analysis 

• The industrial and construction services landscape continues to evolve as the world monitors the effects of COVID-19
• We believe strong backlogs, government programs, and cost-cutting measures will allow many construction and industrial service companies to maintain performance in line with or slightly below 2019 levels; however, second half performance and long-term outlook remains uncertain
• While customer sites and projects have largely remained active throughout the pandemic, companies are struggling with the labor side of their operations as a result of existing tight labor markets, decreased personnel capacity, and increased security measures across sites
• Record levels of fiscal stimulus coupled with sustained low interest rates create a supportive environment for continued investment in infrastructure and commercial projects
• The outlook for an oft-cited national infrastructure spending package remains uncertain; whether or not this spending bill gains further traction remains to be seen
• Industrial and construction M&A fundamentals remain solid and activity has continued (albeit slowed) through the first two quarters
• Lenders remain cautious due to looming market uncertainty, and access to institutional lending may see a prolonged slowdown as banks are bogged down with PPP loan servicing and portfolio management, likely leading to slowness in lending, new construction starts, and M&A in the second half of 2020 and early 2021
• Industrial and construction services backlogs are healthy and visible through the end of 2020, whereas backlog and pipeline data heading into 2021 is less certain and expected to be down compared to 2019 and the first half of 2020
• That said, many industry sources are predicting a return to growth in 2021 as uncertainty dissipates and pent-up demand drives new projects
• TKO Miller’s industry outlook remains slightly bearish for the second half of 2020 and into early 2021, but more optimistic beyond that

Industrial and Construction Services News

Construction Industry Finds New Innovations to Stay Ahead of COVID-19

The way construction work gets done is rapidly evolving to meet the challenges of the COVID-19 pandemic. United Rentals recently announced it is disinfecting all surfaces and controls, and it will require a “last touch” cleaning of all surfaces the delivery driver touches before handoff. Other rental companies have put in place similar procedures. Beyond basic social distancing, the need to improve sanitation and hygiene on construction sites was already an issue before the current crisis, and contractors are applying their expertise to the problem. [LINK]

By Timothy Oleszczuk on Jul 17, 2020 2:00:45 PM