Underground Construction - July 2021 - 24

3rd Quarter Utility & Communications Construction Update
a combination of all of these, but
because of the decreased workforce
participation, childcare seems to be
high on the list. One is not included in
the unemployment statistics if they are
not actively looking for a job.
The challenge in getting people back
to the workplace has created a surprising
rise in the employment cost index (total
compensation for all civilian workers).
10
-10
-5
5
3/10/21
4/6/21
5/5/21
FIGURE 4: 3 Month UCC Index. Source: FMI Research, S&P Capital IQ; as of June 10, 2021
6/3/21
S&P 500
UCC Index
The three-month percentage change had
its largest rise in the past 10 years and
is odd juxtaposed against the current
unemployment rate. Individuals are
choosing to stay home rather than take
a job that is paying higher wages. The
rise of the ECI shows that employers
are having to lure people back to the
workforce and pay current employees
higher salaries to retain them.
FIGURE 5: UCCI Companies Performance
FIGURE 5: Recent Deal Activity
Announced
Target
March 2021
March 2021
April 2021
May 2021
May 2021
June 2021
Aegion Corporation
Gibson Technical Services
ADB Companies
INTREN
Feeney Utility Services
K.R. Swerdfeger Construction
24 JULY 2021 | UCONonline.com
We discuss all the unemployment
concerns because the federal reserve
chairmen, Jerome Powell, has stated
on multiple occasions that they are
willing to " look past " the transient rise
in inflation to achieve full employment.
The CPI increased another 0.6 percent
in May (above consensus), and we are
seeing significant increases in the cost
to operate. Labor, equipment, inventory
and fuel have all increased their cost
over the past six months. Supply issues
are a concern for almost all underground
contractors suggesting the price pressure
is not likely to subside in the back half of
2021. The hope of the federal reserve is
that as the economy comes up to speed
that the prices hold at current levels or
decline slightly, but we have seen little
evidence that is occurring in the utility
and communication markets to date.
The Utility & Communications
Construction Index presents the price
performance of the sector's publicly
traded stocks over the past three years
(FIGURE 2), last 12 months (FIGURE 3)
and the past three months (FIGURE 4).
The UCC Index has a reduced the number
of companies in this period because
Aegion was taken private by New
Mountain Capital. Thus, the UCC Index
now represents the 10 companies in
FIGURE 5. I included both the three-year
performance and the LTM performance
of the UCC Index to highlight the
relative decline of the industry followed
by the impressive gains over the
Acquirer
Business Description
New Mountain Capital
Orbital Energy Group
Warren Equity
MasTec
Artera Services
Artera Services
Pipeline and infrastructure services
Communication construction
Diverse utility infrastructure construction
Power T&D services
Gas distribution
Gas distribution and underground infrastructure installation
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Underground Construction - July 2021

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