As concerns grow over water shortages and the good quality of the world’s provide, a current ChangeWave industry survey finds elevated water project spending for 2008 – but not at the levels of earlier years. And there may be problems ahead.
According to the survey of 147 professionals functioning in the water sector, two-thirds (67%) believe water project spending will boost over the next 12 months – but that represents a sizable 14-point drop from the preceding ChangeWave survey in June 2007.
In spite of the decline, these results are nevertheless reasonably upbeat. However, the survey shows clouds looming over the market that could push spending numbers down further – and they’re centered in the U.S.
Zeroing in on the United States
The Wall Street Journal lately reported that 40% of fresh water consumption in the U.S. is from industrial applications and that water use generally falls during an financial recession. Additionally, the stock prices of a lot of U.S. water utility companies have declined not too long ago on fears of a recession.
Add to this the findings of our ChangeWave survey, which shows a drop in the percentage of U.S. water market respondents who think project spending will enhance over the next 12 months within the private, federal and neighborhood government sectors.
Note the main reason for these a lot more conservative development projections is really simple:
By far better than a 2-to-1 margin, market respondents believe a U.S. recession would lead to decreased water project spending.
“Investors in water should hold a close eye on water project spending in the course of a recession,” says Josh Levine, co-editor of ChangeWave Investing. “But our survey also shows there are still lots of opportunities out there. In particular, industry respondents are most excited about two sectors right now – Wastewater Therapy and Water Infrastructure Repair and Replacement. That is where we are focused.”
Respondents were also excited about a short list of prime water businesses, with sector behemoth General Electric (GE) (42%) ranking as the leader. Of course, GE is a large conglomerate and water is only a little component of their enterprise. But there are a handful of other firms business respondents cited as obtaining momentum:
*American States Water (AWR) – the one utility of this group, engaged in the acquire, production, and distribution of water for California residential and industrial buyers. California’s favorable regulatory atmosphere and quickly growing population bodes effectively for the company’s future income.
*Flowserve (FLS) – a seller of precision-engineered flow handle gear, Flowserve receives two-thirds of its company from overseas markets in water as well as other industries. Lately the company’s been on a roll, getting seasoned record bookings in 2007.
*Gorman-Rupp (GRC) – the company’s pumps and fluid control equipment are utilised in water, wastewater, and other industrial applications. Gorman-Rupp not too long ago announced a five-for-4 stock split and is enjoying record sales, a enhance in new orders, and elevated penetration inside international markets.
*Calgon Carbon (CCC) – focuses on purifying water and air with its granular activated carbon, which is employed in the removal of organic compounds from liquids and gases. Not too long ago it really is been an exceptional performer in the water group, its shares rising considerably over the past year.
*Nalco Holding Co. (NLC) – supplies water remedy items and services to avoid corrosion, contamination and the create up of damaging deposits. Its concentrate is on production processes that improve efficiency and enhance customers’ end items.
Ben Franklin stated it clearly much more than two centuries ago, “When the well’s dry, we know the worth of water.”
And whilst there may be blips in the rate of water spending short term, smart investors know that water concerns are going to be with us for centuries to come.