China quake boost for heavy equipment seen modest
Written on May 26, 2008
It’s being characterized as the worst natural disaster to strike the world’s most populous country in three decades and it has left an estimated 5 million people homeless.
So will the earthquake that devastated China’s Sichuan Province earlier this month — and the massive reconstruction to follow — improve the sales of construction equipment makers like Caterpillar Inc (CAT.N: Quote, Profile, Research), Terex Corp (TEX.N: Quote, Profile, Research), Komatsu Ltd (6301.T: Quote, Profile, Research), Deere & Co (DE.N: Quote, Profile, Research) and others?
Not as much as some investors might expect, say industry analysts who argue that the effects of natural disasters do not alter overall sales trends.
“It’s probably going to move the needle a little bit, but not a lot,” said Donald Straszheim, the former chief economist at Merrill Lynch and a longtime China specialist who now serves as vice chairman of Roth Capital Partners in Newport Beach, California.
In the days following the May 12 earthquake, which measured 7.9 on the Richter scale, television news coverage has often featured shots of bulldozers, cranes and other heavy equipment with familiar corporate logos involved in emergency efforts.
Asking what companies might benefit from the disaster is an awkward but natural question for many investors.
As the Chinese rebuild the hospitals, schools, dams, roads, power grids, telecommunication systems and other critical infrastructure flattened by the earthquake, who will benefit?
In the aftermath of Hurricane Katrina, which battered the U.S payday loans in 1 hour. Gulf Coast in 2005, a host of companies reported stronger sales as communities rebuilt, including trailer maker Fleetwood Enterprises Inc. (FLE.N: Quote, Profile, Research), generator-maker Briggs & Stratton Corp (BGG.N: Quote, Profile, Research), home improvement retailers Home Depot Inc (HD.N: Quote, Profile, Research) and Lowe’s Companies (LOW.N: Quote, Profile, Research), and building restoration company Munters AB (MTRS.ST: Quote, Profile, Research).
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