U.S. markets have long had a vested interest in China's
growth. That's why the latest stimulus attempt by the world's
second-largest economy is good news for one U.S. sector in
Earlier this month, the Chinese government announced plans to
devote $157 billion (or 1 trillion yuan) to improving the
country's infrastructure. New highways, railroads, ports and
airport runways will be built - all for the sake of jolting life
into an economy that's in the midst of its
in three years.
The total cost of the 60 total projects equates to roughly
2.1% of China's entire economy. While not quite American Recovery
and Reinvestment Act (ARRA) money -
2009 economic recovery package that will cost $831 billion over a
10-year period - China's stimulus effort represents a significant
commitment for what is supposed to be a four-year project.
Such a large-scale infrastructure overhaul will, of course,
benefit China's myriad construction companies - namely its
machinery and steel makers. But it will also mean a big payday
for certain overseas construction companies - including publicly
traded U.S. entities.
Here are four U.S. companies whose bottom lines are heavily
influenced by China's growth - and whose stocks stand to benefit
from its recovery:
Shares of the world's largest maker of construction equipment
have shot up 8.5% since the Chinese government green-lighted
the projects on September 7. That's well ahead of the S&P
500's 1.9% gains during that time. Better yet - Caterpillar's
stock is still trading at just 10.3 times earnings. Though
China accounts for just 3% of Caterpillar's sales, its slow
growth of late has weighed on Caterpillar's earnings.
Nonetheless, China's business is important to the company.
That's why Richard Lavin, who runs Caterpillar's China
operations, predicted the country's stimulus plan will have a
"broad and significant impact" on the company's bottom line. If
true, expect the stock's resurgence to continue.
Consol Energy (
This Pennsylvania-based coal producer shipped 88,000 tons of
metallurgical coal to Chinese steelmakers in 2009. The
Consol-China relationship has only blossomed since, with the
company shipping 4.8 million tons of coal to China in 2011 -
accounting for almost half the company's $1 billion in exports.
So look for Consol to play a key role in China's infrastructure
improvements, as metallurgical coal is used to make iron and
steel. Investors are already expecting Consol to get a bump
from China's expansion - shares are up 10.5% since the
Joy Global (
The mining-equipment developer has seen its shares rise a
whopping 13.8% since September 7. That's quite a turnaround.
Just last month Joy's stock dipped to a three-year low due in
large part to the slowing Chinese economy dragging down
second-quarter earnings. Now that China is spending big on
infrastructure, its demand for mined products such as coal,
steel and iron ore should increase - which should make for a
better quarter at Joy.
U.S. Steel (
Things like railroads and bridges require a ton of steel -
including imported steel. Since steel prices are determined
globally, the specter of China's stimulus projects likely has a
lot to do with U.S. Steel's 10.5% surge in the last 10
To varying degrees, all four of these U.S. companies are
dependent on China's business. As China floundered over the first
seven months of the year, their stocks fell by an average of
roughly 20%. Now that China is serious about turning things
around, these stocks are getting a jolt of new life.
While the turnarounds likely won't last as long as China's
estimated four-year construction time, the large scope of the
country's planned improvements should be enough to boost earnings
and keep the stocks running for quite some time.