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Is This the Best Industry in the Construction Sector Right Now?
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It goes without saying that since the November presidential election, Donald Trump has emerged as the most momentous figure in financial markets. Investors are expecting faster growth based on Trump’s campaign pledges of significant tax cuts, higher infrastructure spending and lesser regulations.
However, is his recent defeat on the health care legislation a sign of trouble for the rest of this agenda? Although some analysts and investors are still confident of Trump keeping his promises, the broader markets are looking for concrete results.
Given this scenario, corporate tax reform and infrastructure spending are likely to create headlines going forward. After all, construction and manufacturing companies are giving a solid performance in 2017 banking on the impression that infrastructure would provide a boon going forward. Additionally, corporate tax cuts are expected to boost earnings across the board.
Housing/Homebuilding Showing Signs of Confidence
The Zacks construction sector has advanced 7.1% so far this year, comparing favorably with the 5.2% growth for the broader market (S&P 500). The industry also outperformed the broader market in the last one year, as you can see below:
(Year-to-date Performance)
(1 Year Performance)
Especially, housing/homebuilding industry has been riding high lately on solid new home sales data, affordable interest/mortgage rates and impressive housing starts figure. Resilient job growth and a healthy demand-supply balance along with seemingly high homebuilders’ confidence are adding to the momentum. The uptick in mortgage rates seems to be having a minimal effect on the industry.
If we delve deeper into the Construction sector, the Building Products - Air Conditioner/Heating industry needs special mention, as it falls within the top 13% of the Zacks Industry Rank which reflects the industry's strong earnings outlook. The policy uncertainty issue has weighed on this industry lately as well, but the industry still remains modestly ahead of the broader market (S&P 500), as you can see below:
This industry’s 3 to 5 year expected earnings per share (EPS) growth rate of 14.9% is better than the sector’s 10.7% rate. Moreover, the industry boasts a solid Return on Equity (ROE) of 27%, comparing favorably with the construction sector’s ROE of 10.33% and the broader market’s 15.2%.
Favorable Economic & Industry Figures Signal Strong Potential
Consumer Confidence, a key determinant of the economy’s health, improved significantly in March, reaching its highest level in 16 years. According to the recent Conference Board data, the Consumer Confidence Index rose to 125.6 in March from February’s reading of 116.1. This indicates that consumers have given the new administration's policies a thumbs up.
Spiraling consumer confidence, an improving job scenario and rising wages are indicators of a stronger economy. Naturally, stocks within the industry that have the potential to counter macroeconomic headwinds seem quite reliable and attractive.
Now, demand for Building Products - Air Conditioner/Heating industry products is related to the performance of the broader housing construction market. Construction activity picked up in 2017. Positives like an improving economy, modest wage growth, low unemployment levels, positive consumer confidence and a tight supply situation raise optimism over the housing sector’s performance this year. As such, Building Products - Air Conditioner/Heating industry should also increase, thereby driving its revenues.
Another stock, Watsco Inc. (WSO - Free Report) , carries a Zacks Rank #3 (Hold) and has growth potential with a solid 3–5 year expected earnings per share growth rate of 15%. The company is the largest distributor of heating, ventilation and air conditioning equipment as well as related parts and supplies (HVAC/R) in the U.S.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>
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Is This the Best Industry in the Construction Sector Right Now?
It goes without saying that since the November presidential election, Donald Trump has emerged as the most momentous figure in financial markets. Investors are expecting faster growth based on Trump’s campaign pledges of significant tax cuts, higher infrastructure spending and lesser regulations.
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However, is his recent defeat on the health care legislation a sign of trouble for the rest of this agenda? Although some analysts and investors are still confident of Trump keeping his promises, the broader markets are looking for concrete results.
Given this scenario, corporate tax reform and infrastructure spending are likely to create headlines going forward. After all, construction and manufacturing companies are giving a solid performance in 2017 banking on the impression that infrastructure would provide a boon going forward. Additionally, corporate tax cuts are expected to boost earnings across the board.
Housing/Homebuilding Showing Signs of Confidence
The Zacks construction sector has advanced 7.1% so far this year, comparing favorably with the 5.2% growth for the broader market (S&P 500). The industry also outperformed the broader market in the last one year, as you can see below:
(Year-to-date Performance)
(1 Year Performance)
Especially, housing/homebuilding industry has been riding high lately on solid new home sales data, affordable interest/mortgage rates and impressive housing starts figure. Resilient job growth and a healthy demand-supply balance along with seemingly high homebuilders’ confidence are adding to the momentum. The uptick in mortgage rates seems to be having a minimal effect on the industry.
If we delve deeper into the Construction sector, the Building Products - Air Conditioner/Heating industry needs special mention, as it falls within the top 13% of the Zacks Industry Rank which reflects the industry's strong earnings outlook. The policy uncertainty issue has weighed on this industry lately as well, but the industry still remains modestly ahead of the broader market (S&P 500), as you can see below:
This industry’s 3 to 5 year expected earnings per share (EPS) growth rate of 14.9% is better than the sector’s 10.7% rate. Moreover, the industry boasts a solid Return on Equity (ROE) of 27%, comparing favorably with the construction sector’s ROE of 10.33% and the broader market’s 15.2%.
Favorable Economic & Industry Figures Signal Strong Potential
Consumer Confidence, a key determinant of the economy’s health, improved significantly in March, reaching its highest level in 16 years. According to the recent Conference Board data, the Consumer Confidence Index rose to 125.6 in March from February’s reading of 116.1. This indicates that consumers have given the new administration's policies a thumbs up.
Spiraling consumer confidence, an improving job scenario and rising wages are indicators of a stronger economy. Naturally, stocks within the industry that have the potential to counter macroeconomic headwinds seem quite reliable and attractive.
Now, demand for Building Products - Air Conditioner/Heating industry products is related to the performance of the broader housing construction market. Construction activity picked up in 2017. Positives like an improving economy, modest wage growth, low unemployment levels, positive consumer confidence and a tight supply situation raise optimism over the housing sector’s performance this year. As such, Building Products - Air Conditioner/Heating industry should also increase, thereby driving its revenues.
Top picks in the Building Products - Air Conditioner/Heating domain include AAON, Inc. (AAON - Free Report) and Comfort Systems USA, Inc. (FIX - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>
Another stock, Watsco Inc. (WSO - Free Report) , carries a Zacks Rank #3 (Hold) and has growth potential with a solid 3–5 year expected earnings per share growth rate of 15%. The company is the largest distributor of heating, ventilation and air conditioning equipment as well as related parts and supplies (HVAC/R) in the U.S.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>