Underground Construction - October 2022 - 16

Utility & Communications Construction Update
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FIGURE 3: UCCI Stock Performance
FIGURE 4: Recent Deal Activity
Announced
08/2022
07/2022
07/2022
07/2022
06/2022
Target
Knife River Corp.
William E. Groves Construction
IEA, Inc.
Rowland, Inc.
PLH Group, Inc.
Acquirer
Public (Split-off from MDU)
Quanta Services
MasTec, Inc.
Calvert Street Capital
Primoris Services Corp.
tomers repairing, upgrading and building
new infrastructure in the coming years.
Th e
Business Description
Construction Materials
Electrical T&D, Substation
Diversifi ed Civil EPC
Water and Wastewater
Electric & Gas T&D
Utility & Communications
Construction Index (UCCI) presented
below presents the stock performance of
the sector's publicly traded stocks yearto-date
(FIGURE 1) and the past three
months (FIGURE 2).
February 2022
UCONonline.com
MUNICIPAL
FORECAST
Climate Goals Will Require
Gas, Pipelines
Coatings Help Rebuild
Collection Systems
Washington 2022:
Good, Bad, Ugly
Year-to-date performance UCCI illustrates
the impact that federal funding
is expected to have on the utility services
industry relative to a broader market that
is more impacted by increasing costs to
fi nance debt. Th e UCCI and S&P 500 are
nearing the lows for the year and unless
there is a turn in federal reserve policy,
the most likely outcome is a bearish
fourth quarter outlook for the publicly
traded companies.
Th e third quarter experienced high
volatility in the stock market and ended
near the lows of the year, as infl ation persisted
and the Federal Reserve continued
to increase the Federal Funds Rate. Th e
result was a highly correlated third quarter
of performance between the UCCI
and the S&P 500, but UCCI remains well
above the broader indices year-to-date.
Deal activity within the third quarter
16 OCTOBER 2022 | UCONonline.com
resulted in meaningful updates to UCCI.
Th e fi rst acquisition of PLH Group by
Primoris nearly doubled the power-delivery
business of Primoris, increased the
amount of revenue that Primoris receives
from recurring master-service agreement
work, and expands its presence geographically,
as well. IEA, a former member of the
UCCI companies, is being acquired by
MasTec in a move that would meaningfully
expand its renewable EPC capabilities.
Th e other change to UCCI was a splitoff
of the construction materials business
from MDU that separated the utility
and utility services companies. Deal
activity in the fourth quarter for utility
services is expected to remain consistent
despite rising interest rates due to action
by the Federal Reserve. Tailwinds supplied
by Federal funding (Infrastructure
Investment and Jobs Act & the Infl ation
Reduction Act), infrastructure repair
and transition
to
renewables/electric
infrastructure are expected to buoy the
utility and utility services sectors. UC
DANIEL SHUMATE,
Managing Director,
FMI Capital Advisors Inc.
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Underground Construction - October 2022

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