November construction spend and ABI index data are positives for LSI Industries
Yesterday we received a rather favorable November Construction Spending report. I continue to see the overall improvement in nonresidential spending, — due in part to post-hurricane rebuilding efforts — benefiting the shares of Tematica Investing Select List resident LSI Industries (LYTS) in the weeks to come. Also in the coming weeks, President Trump is set to unveil his rebuilding US infrastructure framework and in my view, this is a likely catalyst to drive LYTS shares higher.
Now let’s recap yesterday’s report from the Census Bureau…
Per the report, November Construction Spending rose 0.8% month over month and 2.4% year over year, continuing the string of improvement that began in August. Breaking the report down, private residential construction rose 1.0% month over month while private nonresidential construction rose 0.6%, a sharp tick higher compared to the modest contraction in October due primarily to a boost in commercial spending (+4.6% month over month. Turning to public construction, nonresidential spending increased 0.9% in November as office spending grew 5.5% and transportation spending rose 3.7%.
Aside from the upbeat view on nonresidential construction offered by this report, I also like that it backs up the recent Architecture Billings Index (ABI) reading for November that hit 55.0 for the month, its strongest reading for 2017. I look at a number of these indices, and it always helps to understand what each’s particular reference scoring system in mind. In the case of ABI, an index score of 50 represents no change in firm billings from the previous month, a score above 50 indicates an increase in firm billings from the previous month, and a score below 50 indicates a decline in firm billings from the previous month.
- Our price target on LSI Industries (LYTS) shares remains $10.