Highway, Street & Bridge Construction

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 8,700 construction companies in the US build transportation-related infrastructure; including highways, roads, streets, airport runways, and bridges. Companies may also build driveways and parking areas. Industry revenue consists of new construction (59% of industry sales), additions, alterations, or reconstruction (22%), and maintenance and repair (19%).

Dependence On Government Spending

The majority of industry revenue comes from publically funded programs, mainly state and local government projects.

Variability In Costs

With low margins, variability in the cost of materials and labor can be a challenge, particularly for fixed unit price and lump sum contracts.

Industry size & Structure

A typical highway, street, or bridge construction company operates out of a single location, employs about 40 workers, and generates about $14 million annually.

    • The highway, street, and bridge construction industry consists of 8,700 companies that employ about 353,400 workers and generate $124 billion annually.
    • Government contracts account for about 73% of industry revenue, and the majority of government contracts are issued by state and local governments.
    • Large companies include Kiewit Corporation, Granite Construction, and US divisions of Skanska.
    • Most small to medium-sized companies operate within a limited geographical market.
                              Industry Forecast
                              Highway, Street & Bridge Construction Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Feb 16, 2024 - Wages, Input Costs Rise
                              • Highway, street, and bridge construction firms may feel their margins pinched by higher materials and labor costs. In the fourth quarter of 2023, highway, street, and bridge construction wages were up moderately compared to the same period a year earlier, according to the BLS. Around the same time, BLS data show producer prices for some key industry inputs – including asphalt paving mixture and blocks – increased slightly. Industry employment increased significantly in Q4 2023 compared to the same time in 2022, according to the BLS.
                              • Total highway and street construction spending is projected to rise 9% in 2024 over 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. While 2024 growth will moderate compared to the 16% year-over-year growth seen in 2023, Infrastructure Investment and Jobs Act (IIJA) funding will help highway and bridge spending exceed historical levels. Inflation and other cost pressures are expected to ease in 2024, prompting states to move forward on projects that had been paused due to high costs. FMI also expects highway project investments to shift from renovations to new and expanded capacity. In December 2023, the Federal Highway Administration (FHWA) opened a notice of funding opportunity for up to $9.6 billion per year through fiscal 2026 for bridge grants. Highway and street construction spending is expected to slow to 6% growth in 2025, then drop further to 4% and 3% growth in 2026 and 2027, respectively.
                              • The Associated Builders and Contractors (ABC) Construction Backlog Indicator for infrastructure projects declined 0.6 months to 7.3 months in January compared to December. Infrastructure backlogs were down 1.3 months compared to January 2023’s 8.6 months. The ABC’s Construction Confidence Index for sales rose to 59.3 in January from 58.9 in December. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said that the January drop in the infrastructure backlog may be due only to seasonality and that contractors serving the infrastructure market would likely remain busy in 2024.
                              • While merger and acquisitions (M&A) activity in the engineering and construction (E&C) sector continues to face challenges in 2024 - including high interest rates and overall economic uncertainty - opportunities remain, especially in certain well-positioned pockets of the E&C sector, according to a recent report by PwC. Much of the commercial real estate sector faces ongoing headwinds, including sluggish project demand, looming refinances, and weak office occupancy. However, firms with exposure to the infrastructure market - particularly in areas including transportation, engineering services, and power and telecommunications – are increasingly attractive to investors.
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