The Zacks Analyst Blog Highlights:Automatic Data Processing, Quanta Services, Fluor, AECOM Technology and General Motors

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Feb 13, 2014, 09:30 ET

CHICAGO, Feb. 13, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Automatic Data Processing, Inc. (Nasdaq:ADP-Free Report), Quanta Services, Inc. (NYSE:PWR-Free Report), Fluor Corp. (NYSE:FLR-Free Report), AECOM Technology Corp. (NYSE:ACM-Free Report) and General Motors Co. (NYSE:GM-Free Report).

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Here are highlights from Wednesday's Analyst Blog:

Has Construction Stalled? 3 Solid Choices

Construction spending increased by a mere 0.1% in December 2013, sharply lower than the 0.8% gain for the earlier month. This is significantly lower than the gains made last year and, at first glance, seems to suggest that activity in this sector seems to be slowing down.

Engine of Employment

The fact that construction is one of the most crucial sectors for the economy was borne out once again by this month's employment report. Construction added the highest number of jobs in January. The increase of 48,000 easily offset the decline of 22,000 in December.

Residential and nonresidential building added 13,000 and 8,000 jobs respectively. Meanwhile nonspecialty trade conductors added 13,000 jobs. A report from Automatic Data Processing, Inc. (Nasdaq:ADP-Free Report), released a few days earlier had estimated that 25,000 jobs were added by private construction.

The Prospects of Non-Residential Spending

For 2013, the value of construction in the U.S. increased 4.8%. Spending on private construction increased by 8.5% for the year. The major contributor to private sector investment was residential construction, which grew by 18%. On the other hand, non-residential construction declined by 0.4% during the period.

However, the prospects in this sector are far from gloomy. Reacting to the data, Ken Simonson, chief economist with the Associated General Contractors of America (AGC) said, "Residential construction ended on a strong note in 2013 and should remain positive for at least the next several months. Meanwhile private non-residential spending appears to be poised for a rebound."

Lagged but Sustainable Demand

Growth in investments on private non-residential construction usually lags behind the economy has a whole. A certain amount of growth has occurred in this area over the couple of years but there is more room for growth. Incidentally, a lot of this growth has happened in the energy and power sectors.

The boom in the oil and gas sector could lead to an increase in private non-residential construction in the current year. This will include manufacturing plants, pipelines, railroads and natural gas fuelling stations.

At the same time, communities located in areas where such activities are conducted can expect more housing, hotels and retail construction. According to the AGC, private non-residential spending should grow between 6 to 10% in 2014.

Below we present three companies operating in the non-residential construction domain with a diverse set of interests and capabilities, each of which also have a good Zacks Rank.

Quanta Services, Inc.

Quanta Services, Inc. (NYSE:PWR-Free Report) provides infrastructure solutions, focusing on the natural gas and oil pipeline and electric power sectors. The company offers specialty contracting services, including design, installation and maintenance services.

Quanta Services, Inc, holds a Zacks Rank #2 (Buy) and has expected earnings growth of 13.60%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is relatively high at 17.55.

Fluor Corporation

Fluor Corp. (NYSE:FLR-Free Report) provides professional services, including engineering, procurement, construction and maintenance. The company also offers project management services worldwide, across such diverse domains as oil and gas, petrochemicals and manufacturing.

Currently the company holds a Zacks Rank #2(Buy) and has expected earnings growth of 9.60%. It has a P/E (F1) of 17.59.

AECOM Technology Corporation

Our third choice is AECOM Technology Corp. (NYSE:ACM-Free Report). The company offers technical and management services worldwide to governments as well as private clients. It is a provider of planning, consulting and design services for infrastructure, commercial housing, power and utility facilities.

Besides a Zacks Rank #2 (Buy), AECOM Technology Corporation has expected earnings growth of 5.90%. It has a relatively higher P/E (F1) of 11.33.

Recently released growth numbers indicate that the economy is now set for better times. This is being supported by repeated reductions of the Fed stimulus package. As the economy continues to pick up steam, these stock picks are in a position to leverage the gains accruing to the construction sector.

Record Sales for GM in China

General Motors Co. (NYSE:GM-Free Report) and its joint ventures in China recorded a 12% year-over-year increase in sales in the nation in Jan 2014, taking the figure to 348,061 vehicles. The improvement was mainly attributable to strong domestic sales at Shanghai GM and SAIC-GM-Wuling and record high performance by the Buick and Wuling brands.

Sales at Shanghai GM rose 11.4% to 171,856 vehicles in China. Sales by SAIC-GM-Wuling stood at 172,852 vehicles, up 13.9% year over year. However, FAW-GM's products' demand in China declined 26.1% year over year to 3,319 vehicles.

GM offers a wide range of vehicles and brands in China. The different brands for passenger cars and commercial vehicles are Baojun, Buick, Cadillac, Chevrolet, Jiefang, Opel and Wuling.

Buick brand's sales in China improved 15.7% to 100,127 units in Jan 2014. The improvement was driven by a 44.2% increase in the combined sales of Excelle XT and GT vehicles to 34,176 units. Vehicles sales of the GL8 family surged 114.8% to 11,973 units. Encore SUV sales went up 14.9% to stand at 9,052 units.

Sales of the Cadillac luxury vehicle brand witnessed a phenomenal 265.7% rise to 5,741 units in Jan 2014. Sales benefited from a 96.1% increase in SRX sales and the launch of XTS.

Sales of Wuling increased 13.2% to 163,886 units in the month. The best selling model under the brand was the Hong Guang family, which recorded a 69.9% rise in sales. Sales of Baojun grew 27.8% to 8,966 units.

However, sales of Chevrolet declined a marginal 0.2%, bringing the number to 65,988 units. Cruze sales were 22,621 units and Sail family sales stood at 21,989 units.

GM is a leading global automotive company. The company has twelve joint ventures and two wholly owned foreign enterprises in China and employs around 58,000 workers. It currently holds a Zacks Rank #5 (Strong Sell).

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