What happened

Shares of a number of commodity and infrastructure companies are being hit hard today after a new report emerged suggesting that President Trump may not tackle one of his largest economic promises until 2018. Being hit especially hard are:

  • Cliffs Natural Resources Inc. (NYSE:CLF): down as much as 12%
  • United States Steel Corporation (NYSE:X): down as much as 10%
  • Fairmount Santrol Holdings Inc. (NYSE:FMSA): down as much as 14%

So what

The issue at stake is a new report from Axios that suggests Capitol Hill's calendar "is way overstuffed" given the need to tackle healthcare reform, tax reform, the federal budget, and to fill an empty Supreme Court seat. As such, Axios' latest report suggests that Trump's infrastructure proposal, which was expected to last for a decade, won't even be tackled until 2018.

Donald Trump with wife Melania.

Image source: U.S. Department of Defense Current Photos, Flickr.

According to Republican sources, pushing the infrastructure plan to next year would give the Republican Congress the breathing room needed to tackle more important issues. The report would also appear to align with comments made recently by Treasury Secretary Steven Mnuchin. Mnuchin told CNBC that strong economic growth isn't expected to be seen in U.S. GDP figures until later in 2018, which would certainly coincide nicely with an infrastructure deal getting passed next year.

Axios' report also suggests that the move to push infrastructure projects a year down the road could be somewhat political in nature. If Democrats were to fight Republican legislation to bring new money to their district, it may not sit well with constituents, allowing the Republicans to maintain their Congressional hold.

The obvious issue with putting off the infrastructure deal is that so many commodity-based companies have rallied strongly on the expectation that Trump and Congress would get a deal passed this year. Thus, iron ore giant Cliffs Natural, steel behemoth U.S. Steel, and building products provider Fairmount Santrol (which is perhaps best known for its role in providing sand-based proppants used in fracking) are taking it on the chin.

Now what

One of the bigger issues for investors and Wall Street is that they may now have to temper their profit expectations for these, and other, infrastructure companies.

Excavator loading a dump truck on a mining site.

Image source: Getty Images.

For example, Cliffs Natural Resources had rallied by more than 50% since the beginning of November, and over the past 90 days, its full-year profit consensus from Wall Street had more than doubled from $0.51 to $1.16. Meanwhile, iron ore prices are only up by about 6% over that timeframe, meaning much of Cliffs gains likely came from the expectation that Trump would implement a sweeping infrastructure plan to fix our nation's bridges, roads, and airports. With that potentially pushed out to 2018, Cliffs' near-term profitability may be tempered a bit.

The same can be said for U.S. Steel, which has witnessed its consensus EPS for the current year leap from $0.57 shortly after Trump was elected to $2.62 today. Investors in Fairmount Santrol, which may get an even bigger boost from Trump's domestic energy focus, may also need to readjust their near-term expectations.

However, it's important that investors keep the bigger picture in mind. While an added year of waiting for an infrastructure deal may not be what was expected by Wall Street, it's not as if the infrastructure deal is off the table for good. Trump brought dozens of policy ideas to the table, and it was pretty clear that not all of them could be tackled simultaneously. An infrastructure spending bill still seems likely at some point during Trump's tenure, and if it comes, it would provide a steady stream of business for the likes of Cliffs, U.S. Steel, and even (to some degree) Fairmount Santrol for years to come.