Key Report Can Shape Price Targets for 3 Construction Holdings

In last Friday’s August Monthly Roundup, we laid out the economic data gauntlet that we face this week and discussed why it has the potential to alter the market’s expectation for multiple rate cuts between September and December.

That gauntlet begins on Tuesday with the Final August Manufacturing PMI reports from S&P Global and ISM at 9:45 a.m. ET and 10 a.m. ET, respectively. S&P’s Flash report for the month showed a pickup across the board in manufacturing activity, but also job creation in that part of the economy and inflation pressures. Now, it's time to see if the data from ISM shows the same.

What’s Expected?

When we look at consensus expectations for ISM’s August Manufacturing PMI, we see the headline figure is forecasted to improve to 49.0 from July’s 48.0. Still contracting, just at a slower pace. Manufacturing prices are expected to inch up to a 65.1 reading, compared to 64.8 in July. While such a print for August would be below the 69.4 to 69.8 range recorded for the March to June months, it would be up significantly compared to the 54.0 figure for August 2024.

After declining steadily in June and July, because the Fed is equally focused on the employment market, the market will be focused on ISM’s manufacturing employment figure for August. We will be too, but let’s remember that manufacturing drives 10% to 15% of GDP, which means ISM’s Service Employment figure on Thursday will be the one to watch ahead of Friday’s August Employment Report.

The timing of that Service Employment figure will also serve as a reference point for Thursday morning’s ADP’s August Employment Change report, which is being published a day later than usual because of the Labor Day holiday. The market expects ADP to show 68,000 jobs were added in August, down from 104,000 in July and but up from the 23,000 lost in June.

As we parse these figures on Tuesday and Thursday, we’ll be looking not only at the reported August figures, but because figures can be volatile month to month, but we’ll also examine what the three-month trailing averages have to say. Based on what we learn as we listen to the data, we’ll position the Portfolio accordingly.

Renewed Questions on Trump Tariffs, Government Shutdown

Just in case you missed it, late Friday, a court decision knocking down most of the Trump administration’s tariffs raised the prospect of the government having to repay the money already brought in. While the federal appeals court on Friday ruled against the administration, it left Trump’s tariffs in place until Oct. 14, allowing the White House time to appeal the case to the Supreme Court.

As you can imagine, we see this injecting new layers of uncertainty into the market. First is the question of whether the U.S. may need to repay collected monies. Second, companies are making the rounds at investor conferences this week and next and are expected to offer an updated view on the current quarter and what lies ahead. This court decision is likely to bring a fresh wrinkle in what they have to say.

Remember, with the market’s P/E multiple stretched, something we discussed in the August Roundup and that The Wall Street Journal wrote about this past weekend, earnings expectations for 2H 2025 and 2026 will be key factors to drive the market higher.

Those layers of uncertainty come not only on top of a potential rate cut rethink, depending on what this week’s data shows, but also a looming Federal government shutdown at the end of the month.

To us, this rising uncertainty is another reason to tread carefully with a stock market at stretched valuations as we enter one of the seasonally weakest months of the year. That’s the glass-half-empty view. The half-full one is that uncertainty can eventually bring opportunity if we keep our eyes open.

July Construction Spending

In the "Conversation" section for the August Roundup, a question was posted about United Rentals URI being over our $950 target. With the Friday close at $956.34, it sure is coming into this week, but at 10 a.m. ET, we’ll get the July Construction Spending report. That next piece of data will give us a reason to revisit our target, not only for URI shares but potentially for the shares of Vulcan Materials VMC and Eaton Corp. ETN.

Ahead of Tuesday's data, we’ve seen a few across Wall Street bump up their URI price target. KeyBank upped its to $1,075 from $960, and Evercore ISI boosted its to $1,075 as well, but from $921. Given the upswing in data center spending and comments around construction mega projects, we agree with the direction of those price target increases, and once we have Tuesday's figures in hand, we can make a better determination.

With the consensus price target for URI shares at $900, which, the last time we checked, was below our current $950 target, odds are there will be more than a few others revisiting their price targets as well.

We’d also note that while we are all for letting our winners run, we will continue to keep a close eye on position sizing, harvesting where it makes sense, should a position creep up to the 4.5% level.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long URI, VMC and ETN.