The last time I covered the Kier (LSE: KIE) share price in August 2019, I recommended that investors should stay away from the company. Its uncertain outlook and high levels of debt were concerning.
This is a view I had held for some time. The last time I suggested that the stock might be a good buy for risk-tolerant investors was July 2019.
Nearly a year later, and I’ve started to turn positive on the Kier share price once again.
Kier share price on offer?
Over the past six months, shares in the construction company have held relatively stable, despite the broader stock market volatility. The Kier share price is off only 1% in 2020.
In some respects, the coronavirus crisis has been kind to Kier. The vast majority of the construction giant’s sites remained operational while the rest of the economy was locked down.
At the end of March, it informed the market that activity was continuing on about 80% of its sites.
The company’s efforts to restructure in 2019 put it in an excellent position to weather the crisis. Throughout 2019, management was focused on cutting costs, establishing cost savings and selling non-core businesses to shore up the group’s balance sheet.
After these efforts, the company seems to have entered 2020 on a stable footing.
That said, while it looks as if Kier might avoid the worst of the crisis, the company is still likely to suffer significant fall out from the subsequent economic pain.
However, it is becoming increasingly clear that the government is looking to stimulate economic demand by pushing forward with major infrastructure projects.
As one of the country’s largest construction groups, Kier’s shares could benefit from this.
The company is already one of the major contractors on the H2S rail project. It is also working on Hinkley Point C, the UK’s first nuclear power station for a generation. It also works with local councils across the country building key resources such as hospitals, schools and community centres.
Before the coronavirus crisis, Boris Johnson’s government had laid out plans to spend £100bn on new infrastructure projects across the UK throughout this Parliament. An acceleration or increase in this target would be a boon for the Kier share price and its peers.
Risk and reward
Overall, Keir’s short-term outlook is uncertain. Nevertheless, the company should benefit over the long run from the government plan to increase infrastructure spending.
What’s more, it looks as if management’s efforts to streamline the business and cut costs have put the company in a strong position to whether the coronavirus crisis.
As such, buying the stock today as part of a well-diversified portfolio could generate attractive total returns over the long run. And merging Kier with a portfolio of equities would help investors minimise risk.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.