TRG | The Bottom Line – 4/5

TRG kicked off Q1’24 “survey season” with the publication of our Q1’24 Heavy Materials& Infrastructure Survey this past week. TRG’s Q1’24 Heavy Materials & Infrastructure Survey focuses on key aggregate, concrete, asphalt and cement volume and pricing trends throughout Q1’24. From a comp perspective, Q1’23  was a very strong quarter, with good weather, end markets performing relatively well, and pricing really starting to flow through (building momentum on relatively easy YOY comps). Bottom line, Q1’23 EBITDA contributions were higher versus historical levels. We expect this year to see a return to more historical contribution levels for Q1 given the comp and how the quarter has shaken out. While February was a great month, Q1 is ultimately decided in how March performs. Companies had guided to such results, which we believe was part pragmatic and part conservative. As March has wrapped up, feedback and observations point to March being ok (better than January trend but not as good as February was YOY). Not to state the obvious (but we will here), Q1 is a “meh” quarter in terms of overall earnings contribution. The greater focus is the tone going into the construction season, all eyes focused on pricing. Which leads to the pricing discussion…The key to pricing visibility historically has been volume visibility. And we maintain that the heavy materials and industrial sector is entering into a 5-10 year period in which secular trends support volume visibility. TRG a year ago put a stake in the ground that the U.S. was entering into a construction “Golden Era.” We think the market “gets” this theme, and heavy materials companies have certainly supported this thesis. Pulling the string further, with the world rapidly deglobalizing, the U.S., put differently, is entering into another amped up phase of reindustrialization. This theme has broad implications, hitting all key end markets – public, non-res and residential. The market certainly has given the broader industrial sector credit (see below), a trend we believe will continue through 2024.