Oppenheimer’s Architecture Billing index Update (ESSX, MGRC, RBA)

Oppenheimer is out with a research report this morning, where it takes a look at the recently released July Architecture Billings Index (ABI) data and what it means for its coverage space. The AIA's Architecture Billings Index (ABI) increased 1.9 points to 47.9 in July from 46.0 in June. While still indicating contraction in non-residential construction activity, July's reading is the second highest since January 2008 (the highest being 48.4 in April 2010). The Oppenheimer analyst noted that the ABI is an estimated 9- to 12-month leading indicator of US construction activity, with 50 representing the growth/decline threshold. July's sub-50 reading (continuing a 30-month sub-50 trend) indicates a continued decline in demand, though improving, for architectural design services. AIA Chief Economist Kermit Baker commented, "Business conditions at design firms remain quite volatile. While this recent uptick [in billings] is encouraging, this state of the industry is likely to persist for a while as we continue to receive a mixed bag of feedback on the condition of the design market from improving to flat to being paralyzed by uncertainty." Companies in Oppenheimer’s coverage space with exposure to non-residential construction trends include (Along with their relative exposure): Essex Rental Corp. ESSX ~10%, McGrath RentCorp MGRC low-/mid-teens, Ritchie Bros Auctioneers RBA <1/3rd, Mobile Mini Inc. MINI ~30%, RSC Holdings Inc. RRR ~35%, United Rentals Inc. URI ~65%+, and American Reprographics Co. ARP ~75%+.