The catalysts boosting construction materials firms right now

FMI’s Construction Materials Index (CMI), which tracks the stock performance of 18 publicly traded construction materials companies, continued its strong run into July. Compared to last month’s update, we see two key trends emerging:

First: “A rising tide lifts all ships.” All three market indices benefited from the current bull run seen in the general market.

Second: The CMI continues to widen its performance above the broader indices.

There are likely a number of macroeconomic factors contributing to this, but three main catalysts for this exceptional performance appear to be guaranteed federal funding, price increases with further increases expected in the latter half of the year, and overall inflation reduction. Investors typically look to mitigate risk, and the CMI companies have thus far maintained earnings and margins throughout a tumultuous year. With earnings season upon us, it will be very interesting to see how the CMI companies report for the second quarter and their outlook for the remainder of the year.

The CMI is a proprietary index of 18 publicly traded companies that operate in the construction materials space. FMI’s CMI includes Arcosa, Buzzi Unicem, Cementos Argos, Cemex, Colas, Construction Partners Inc., CRH, Eagle Materials, Granite Construction, Grupo Cementos de Chihuahua, HeidelbergCement, Holcim, Knife River Corp., Martin Marietta Materials, Summit Materials, The Monarch Cement Co., Titan Cement International and Vulcan Materials Co.

George Reddin, Rob Mineo and Evan Coughlin are with FMI Capital Advisors.

Related: How construction materials firms are faring versus the ‘general market’