Engineering & Construction

Entering 2019 with reasonable to strong financial and cash generation profiles, readjusted business models and end market exposures, the group appears set to recover from current valuation levels.  The longer-cycle nature of client capital investment plans should allow relative revenue visibility for E&C companies through 2020, lifting off 2016-17 trough levels. We believe the group has overly reflected recession concerns; we expect 2019 new business, revenue and earnings performance to improve from 2018. We believe less cyclical markets such as defense and infrastructure should allow for order visibility. Although we remain constructive as waning project deferrals amid longterm deficit dynamics suggest much needed supply response (LNG, copper), we recognize project release risk if oil prices correct further from current levels.