Morningstar - Q3 2021 - 51

EXHIBIT 1
with a few smaller nontraditional aspects tacked
on. Of note, to reach this agreement, it
does not include an increase in the corporate
business tax. We think that this has a high
probability of being passed and could be voted
on as soon as September.
After the passage of this infrastructure
bill, we then expect that Democrats will use the
reconciliation process to address both the
nontraditional infrastructure spending that was
not included in that bill as well as the American
Families Plan. Yet, not all of the nontraditional
spending in the American Jobs Plan would
need to be included in this reconciliation. Much of
the originally proposed spending on revitalizing
U.S. manufacturing has been included in
a new separate bill, the U.S. Innovation and
Competition Act. This bill was recently passed with
bipartisan support in the Senate. The House
version has some differences that need to be
worked out, but we expect this appropriation will
pass. The intent of the bill is to encourage bringing
manufacturing back onshore, especially for
technology components such as semiconductors.
Corporate Taxes Will Be Going Up
Although the bipartisan agreement for the
traditional infrastructure spending does not
include an increase in the corporate business tax,
we continue to expect the tax rate will be
increased, but as a part of a reconciliation as
opposed to a spending bill.
Based on current U.S. trading, it appears that many
investors are pricing in the additional potential
revenue, earnings growth, and economic impact
of the infrastructure plan, but the stock market
does not yet seem to be focusing on the increased
taxes that will likely be required to fund it.
Depending on the size of the final infrastructure
program, a number of tax proposals are on
the table to pay for the initiatives.
Morningstar's head of policy research, Aron
Szapiro, recently reviewed several types of
potential tax increases and how much each would
raise in revenue.1
Traditional Infrastructure Firms Many of these companies are already fairly valued
or overvalued, but the basic materials and industrials sectors will benefit the most.
Basic Materials
Company
Martin Marietta MLM
Summit Materials SUM
U.S. Concrete USCR
Vulcan Materials VMC
Industrials-Heavy Equipment
Caterpillar CAT
Deere DE
Industrials-Diversified
3M MMM
Eaton ETN
Emerson EMR
General Electric GE
Honeywell HON
Hubbell HUBB
JBT JBT
Transportation
CSX CSX
Norfolk Southern NSC
Union Pacific UNP
Landstar System LSTR
Fair
Morningstar
Rating
QQ
QQ
QQQ
QQ
Price
($)
Value
($)
349.84 300.00
34.65 21.00
Price/
Fair
Value
1.17
1.65
73.83 74.00 1.00
170.33 140.00 1.22
Moat
Probability
of Valuation
Impact
Narrow High
Narrow High
None High
Narrow High
Market
Cap
($B)
21.8
4.1
1.3
22.6
QQ
QQ
213.79 163.00 1.31 Wide
347.75 248.00 1.40 Wide
High
High
117.1
108.5
QQQ 192.36 199.00 0.97 Wide
144.41 125.00 1.16
QQQ
QQQQ 12.95 15.70 0.82
Low
QQ
Narrow High
QQQ 214.66 203.00 1.06 Wide
QQQ 182.65 184.00 0.99
136.67 112.00 1.22
QQ
94.50 100.00 0.95 Wide Medium
Narrow Low
Low
Narrow High
Narrow High
111.5
57.5
56.7
113.7
149.1
9.9
4.3
QQ
QQ
QQ
QQ
Knight-Swift Transportation KNX QQQ
Engineering and Construction
Aecom ACM
Fluor FLR
Jacobs Engineering Group J
Ansys ANSS
Autodesk ADSK
Dassault Systemes DASTY
Source: Morningstar. Data as of 06/24/2021.
31.72 28.00 1.15 Wide
263.20 216.00 1.22 Wide
219.11 182.00 1.20 Wide
Low
Low
Low
157.60 134.00 1.18 Wide Medium
45.83 43.00 1.07
None Medium
71.7
65.9
145.6
6.1
7.6
QQQ
QQQ
QQQ
Q
QQ
QQ
61.86 61.00 1.01
17.73 19.00 0.93
131.91 136.00 0.97
None High
None High
None High
339.00 237.00 1.43 Wide Medium
283.67 209.00 1.36 Wide Medium
239.56 194.00 1.23 Wide Medium
9.1
2.5
17.2
29.5
62.4
62.4
1 Szapiro, A. 2021. " Top Earners, Businesses Likely to See Tax Increases, " Morningstar.com, April 7.
morningstar.com/lp/magazine
51
https://www.morningstar.com/articles/1032885/top-earners-businesses-likely-to-see-tax-increases http://www.Morningstar.com http://www.morningstar.com/lp/magazine

Morningstar - Q3 2021

Table of Contents for the Digital Edition of Morningstar - Q3 2021

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Morningstar - Q3 2021 - Cover1
Morningstar - Q3 2021 - Cover2
Morningstar - Q3 2021 - 1
Morningstar - Q3 2021 - 2
Morningstar - Q3 2021 - Contents
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