Investor Essentials Daily

Wiring up the America

June 11, 2024

U.S. infrastructure has deteriorated due to decades of underinvestment.

The pandemic exposed these weaknesses, prompting the $1.2 trillion Bipartisan Infrastructure Law to modernize systems.

Preformed Line Products Company (PLPC) stands to benefit by providing essential products for power and communication infrastructure.

The expected rise in infrastructure activity could boost demand and revenues for PLPC over the next decade.

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The supply chain has seen underinvestment and aging infrastructure for over two decades. As a result, the U.S. infrastructure, both public and private, has slowly deteriorated.

More than 7% of bridges are structurally deficient, and there is a water main break every two minutes, resulting in billions of gallons of treated water lost daily.

Corporate assets are also aging, with the average age of assets at their oldest level in over 20 years. The ratio of net to gross property, plant, and equipment (PP&E) has declined from nearly 59% in 2001 to currently 54%. It will take over $500 billion to bring asset values back to 2001 levels.

This lack of investment has constrained supply chain capacity and efficiency.

The pandemic exposed vulnerabilities as outdated infrastructure struggled to meet surging demand. It was a wake-up call for much-needed upgrades.

The $1.2 trillion Bipartisan Infrastructure Law aims to rebuild aging infrastructure across the United States. This investment is expected to generate sustained demand for industries involved in next-generation infrastructure over the next 10 years.

Areas like construction, engineering, electric grid components, transportation manufacturing, and telecommunications are well-positioned.

Preformed Line Products Company (PLPC) is one of the leading companies that stand to gain significantly from the rising global infrastructure investment.

PLPC has over 75 years of experience designing, manufacturing, and supplying high-quality formed wire products and hardware solutions used extensively in utility, energy, and communications infrastructure projects worldwide.

Its broad product portfolio includes solutions that support, protect, connect, terminate, and secure power cables as well as fiber optic lines.

These products are widely adopted by electric utilities and are used extensively in both overhead power line installations and underground fiber optic cable networks.

While infrastructure spending cycles do create some volatility in demand, PLPC has established a strong foothold and market leadership that has served this sector for many decades.

As governments ramp up investment in modernizing and expanding critical infrastructure over the coming years, demand for PLPC’s hardware solutions and formed wire products is expected to rise steadily.

The market does see infrastructure projects as cyclical in nature. However, the recent commencement of large-scale infrastructure spending programs by the United States signals that the peak demand cycles may be yet to come.

This extended period of infrastructure build-out could drive sustained high demand for PLPC’s offerings for over a decade. With a solid financial foundation and global scale of operations, PLPC is well-positioned to capitalize on these growth opportunities.

An extended cycle of rising infrastructure activity would mean higher and more stable revenues as well as margins for PLPC’s business over the long run.

Best regards,

Joel Litman & Rob Spivey

Chief Investment Strategist &
Director of Research
at Valens Research

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