Insight

Engineering & Construction market update: Q2 2020

KPMG Corporate Finance LLC’s Q2 Engineering & Construction M&A update

Stephen Guy

Stephen Guy

Managing Director, KPMG Corporate Finance LLC

+1 410-949-8909

U.S. Engineering & Construction market overview

  • The Associated Builders and Contractors (“ABC”) reported a construction backlog indicator of 8.1 months in Q2-2020, which was flat relative to Q1-2020 despite the anticipated adverse impacts resulting from the 2020 COVID-19 Global Pandemic
  • The survey conducted by the ABC indicated that construction industry leaders reported increased confidence regarding staffing levels, profit margins and sales during the quarter
  • Despite the stable backlog, profitability over the next six months is anticipated to decline. ABC’s Chief Economist, Anirban Basu commented: “While backlog has been stable…current readings may be hiding some latent weakness…Many contractors indicate that projects are being placed on hold. Some of this may be due to public health or jobsite-specific concerns, but tighter financial conditions also play a role. When projects are postponed, they remain embedded within contractor backlog, but near-term revenue suffers and the probability of outright project cancellation rises.”

Construction backlog(1)


Non-residential construction spending


Construction spending by sector

Footnotes

(1) Associated Builders and Contractors, Construction Backlog Indicator (July 14, 2020).

* Denotes % change in aggregate construction spending for YTD May, on year-on-year basis.

Source: S&P Capital IQ, Associated Builders and Contractors, and wall street research.


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