The upcoming presidential election is one of the most important events that will determine the course of the country’s path over the next four years. As election day gets closer, the stock market has witnessed significant volatility, particularly over the stalled stimulus talks and recent Supreme court nomination. With both the presidential candidates assuming polar opposite stances over the functioning of vital industries, many companies have put expansion plans on hold.
Although recent polls suggest former vice president Joe Biden is in the lead, Trump’s large supporter base combined with a history of beating the polls makes it very hard for investors to make decisions with certainty. However, irrespective of the winning party, the need for proper infrastructure is expected to grow in the upcoming years, as the country adjusts to the new normal.
PNM Resources, Inc. (PNM - Get Rating), Olin Corporation (OLN - Get Rating), and Terex Corporation (TEX - Get Rating) have seen considerable traction over the past few months due to expectations of increased infrastructure spending. A probable Trump re-election would encourage these companies to focus on the housing and technology industry, while Biden’s win should shift the focus to clean energy infrastructure. Nevertheless, as the United States is trying to be self-sustainable, the industrial sector development has been outlined as a crucial recovery point. This ensures the continued growth of the companies, irrespective of who wins the white house.
PNM Resources, Inc. (PNM - Get Rating)
PNM is an electric utility company operating through two segments – Public Service Company of New Mexico (PNM), and Texas-New Mexico Power Company (TNMP). It generates electricity through fuel, coal, and natural gas, as well as renewable energy sources such as wind, solar energy, and geothermal energy.
Irrespective of who wins the election, PNM’s unique business model should provide enough growth momentum for the company in the long term. Both the presidential candidates have laid out elaborate plans to upgrade the country’s existing infrastructure, with vastly different specifics. PNM’s exposure to traditional electricity generating methods as well as renewable energy should make it sit well with the next president after the election.
PNM recently sold its outstanding shares to Avangrid under a strategic merger for $4.30 billion. This merger should catapult PNM to one of the leading companies operating in the renewable energy sector. Having a solid foundation in the traditional electric utility segment, PNM’s expansion should help the company capitalize on the changing socio-economic conditions, as many people are willingly committing to renewable energy, despite their political preferences.
PNM generated $57.50 million in net income in the second quarter ended in June 2020, indicating a significant improvement from the negative year-ago value. EPS increased 44.7% year-over-year to $0.55 over this period.
The consensus EPS estimate of $2.24 for the current year indicates a 3.7% rise from the same period last year. Moreover, PNM beat the street EPS estimates in each of the trailing four quarters, which is impressive. Analysts estimate revenues to increase by 4.5% this year to $1.52 billion.
PNM hit its 52-week high of $56.14 in February but declined 51.8% to hit its 52-week low of $27.08 in March due to the pandemic led market crash. The stock has gained more than 80% since then.
How does PNM stack up for POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
B for Overall POWR Rating.
It is also ranked #22 out of 61 stocks in the Utilities – Domestic industry.
Olin Corporation (OLN - Get Rating)
OLN manufactures and supplies an assortment of chemical products and ammunition internationally. The company operates through three main segments, namely, Chlor Alkali Products and Vinyls, Epoxy, and Winchester. Its products are widely used as raw materials in construction work, as well as water purification and agricultural applications. OLN is a leading supplier of ammunition in the United States.
Trump has endorsed the 2nd Amendment Act time and again throughout his presidency, and has used this as a focal argument in his re-election bid. However, former vice-president Biden has shown his support toward police reforms and curbing gun violence. Both candidates have touted the importance of the agricultural sector, and have vowed to take necessary steps to develop and expand the same. Construction work, on the other hand, should bolster OLN’s growth over the upcoming months given the boom in the housing industry, regardless of the election results.
The company announced partial redemption of senior notes worth $14.60 billion, this is expected to reduce OLN’s interest burden, thereby resulting in higher liquidity and profit-generating capacity.
OLN’s second-quarter financials were largely affected by the pandemic disruption as reflected in its year-over-year decline in revenue and EPS. However, the company ended the quarter with a strong balance sheet, as its cash and cash equivalents position improved 87.9% year-over-year to $237.90 million. Analysts estimate OLN’s EPS and revenue to increase by 95.9% and 12.8%, respectively, next year. OLN has gained more than 90% since hitting its 52-week low of $8.76 in March.
OLN is rated “Buy” in our POWR Ratings system, consistent with its near-term growth potential. It has an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Peer Grade. In the 69-stock Chemicals industry, OLN is ranked #21.
Terex Corporation (TEX - Get Rating)
TEX develops and supplies lifecycle solutions for construction, infrastructure, transportation, mining, and energy industry. It operates through two segments – Aerial Work Platforms and Material Processing. It also provides financing services to customers regarding purchase, lease, or acquisition of TEX’s products.
As the infrastructure industry is expected to witness surging demand, no matter which candidate wins the election. However, the nature of construction work will likely differ, depending on the administration. Nonetheless, TEX widespread construction and infrastructure portfolio makes it well equipped in either case, making it an attractive investment bet.
Though the company’s third-quarter ended September 2020 results reflect a year-over-year decline, it managed to generate $756.60 million in revenue and $0.31 as EPS. Moreover, TEX beat the street EPS estimates by 933.3%. Its cash position improved 7.8% year-to-date to $512.60 million over this period.
The consensus EPS estimate of $1.07 for 2021 indicates significant growth over negative values reported in the prior-year quarter. The consensus revenue estimate of $3.37 billion indicates an 11.6% rise from the same period last year. TEX has an impressive earnings surprise history, as it beat the street EPS estimates in three out of the trailing four quarters. TEX has gained more than 110% since hitting its 52-week low of $11.54 in August.
It’s no surprise that TEX is rated “Buy” in our POWR Ratings system, with an “A” for Trade Grade, and a “B” for Peer Grade and Industry Rank. It is currently ranked #13 out of 42 stocks in the Industrial – Building Materials industry.
PNM shares were trading at $49.85 per share on Friday afternoon, up $0.03 (+0.06%). Year-to-date, PNM has gained 0.31%, versus a 2.35% rise in the benchmark S&P 500 index during the same period.
