Public Engineering, Construction Firms Underperforming Broader Market

NEW YORK, N.Y. — According to FMI's 2015 Issue 2 M&A Advisor, public engineering and construction firms are underperforming the broader market.

Public E&C firms historically have outperformed the broader market during periods of expansion and underperformed during periods of contraction. However, this has not been the case for the E&C industry during the latest bull market. Between June 30, 2010 and June 30, 2015, the S&P 500 outpaced the growth of FMI's contractor index by 61 percent. Over that time, the S&P 500 grew by over 100 percent; whereas, the median share price of the firms in FMI's contractor index climbed less than 40 percent.

According to Chris Daum, president of FMI Capital Advisors, “A variety of circumstances have weighed on publicly traded E&C firms in recent years, including the inability to increase margins, weak foreign markets, anemic public funding and a steep decline in oil prices. As a result, five years into a recovery, the E&C industry continues to trail the broader economy and may not reach pre-Great Recession levels before the next downturn.”

The report can be downloaded here.