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5 Construction Stocks to Tap Best Q1 GDP Growth Since 2015
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U.S. GDP growth for the first three months of this year was reportedly the highest for any first quarter since 2015. At full employment, the economy is presently showcasing remarkable strength in both business and consumer confidence. The Federal Reserve is also anticipated to announce additional rate hikes this year, taking cues from a tight labor market scenario and a fiscal stimulus plan by the Trump administration.
A sign of robust economic momentum will likely bolster infrastructure spending in the United States. Against this backdrop, allocating your hard-earned money in selective construction stocks can prove to be a masterstroke.
Better-Than-Expected Growth
Last Friday, the Bureau of Economic Analysis (BEA) revealed that GDP growth rate was 2.3% for the January-March quarter, better than the 2% gain predicted by Wall Street analysts.
In the last four quarters, GDP growth rate averaged 2.9%, almost in line with 3% growth predicted by the Trump administration. However, the American economy slightly slowed in the three months ended March, on account of decelerated growth in consumer spending and “seasonal quirks”. It largely stemmed from seasonal amendment issues, relating to how BEA factors in abnormal changes in the U.S. economic activity. Nevertheless, the setback is presumed to be momentary against the milieu of heavy fiscal stimulus and stretched labor market conditions.
The economy’s aggregate productivity of goods and services topped expectations in the first quarter, sustaining hopes of a solid recoil for the rest of the year.
Trump’s Impetus
The first-quarter GDP reading is not a spot-on reflection of the U.S. economy; as the full impact of increased government spending and tax cuts has not yet materialized. Consumer spending growth braked at 1.1% in the first quarter due to delayed tax deferrals. The December Tax Cuts and Jobs Act bill was effectual in January and did not show in employees’ paychecks until late first quarter.
However, we notice that government spending advanced at a 1.2% rate in the January-March session and is expected to gain momentum from the second quarter, on the back of increased public expenditure lately approved by the U.S. Congress. The U.S. President’s promise of a $1.5-trillion fiscal stimulus program is likely to provide a lot of economic juice in the next couple of years.
The slowdown in first-quarter consumer spending was largely offset by 6.1% growth in corporate investment, reflecting upside in business inventory rebuilding and gains in oil and gas exploration. Investments of nonresidential structures also surged 12.3% in the quarter.
Moreover, on Friday, Trump highlighted a fresh section of his economic program, relating to America’s trade deficits with other major economies like Germany. A slight dip in deficit balance added 0.2% points to first-quarter GDP growth and is likely to support more gains going forward due to Trump’s focus on “fair” trade practices.
Fed Expectations
The Federal Reserve will likely shrug-off the repercussion of a tepid GDP growth rate in the first quarter. The Mar 20-21 minutes session revealed that policymakers "expected that the first-quarter softness would be transitory," on account of "residual seasonality in the data, and more generally to strong economic fundamentals."
The Fed has lifted interest rates to 1.75% last month and will possibly execute additional hikes this year to curb unwanted inflation in the economy. The U.S. economy is at its full employment and a stretched labor market will eventually push up inflation; as employers are trying to brave workforce shortages with higher wages. Notably, a report released on Friday disclosed that wages of U.S. private sector employees went up by 1% in the first quarter, marking the biggest quarterly rise in the last 11 years.
How to Play the Market
Increased public spending, lower tax rates, upbeat wage rates and reduced trade deficits will likely foster U.S. GDP growth in the future. Sturdier economic growth will augment aggregate construction spending in the United States. Per the Census Bureau, U.S. construction spending rose 4.4% year over year to $176.3 billion in the first two months of this year.
Per the latest Earnings Preview report, earnings and revenues of all construction stocks in the benchmark index will likely climb 46.7% and 17.3%, respectively, on a year-over-year basis in the first quarter.
In order to cash in on the solid growth potential of the sector, we have handpicked five construction stocks that will likely add a sparkle to your portfolio.
These companies carry a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and currently flaunt an attractive VGM Score of A or B. These stocks have pulled off a positive average earnings surprise for the last four quarters and the Zacks Consensus Estimate for first-quarter earnings has been revised upward for the current year over the last 30 days. Additionally, the attractiveness of these picks is further accentuated by positive sales and earnings forecast for this year. Notably, these companies have outperformed 5.7% gains recorded by the sector in the last year.
Let's dig a little deeper into these five choices to get a fair idea of their individual strength.
Boise Cascade Company (BCC - Free Report) manufactures and distributes wood products and building materials in the United States and Canada. The company has pulled off a positive average earnings surprise of 52.92% in the last four quarters. The Zacks Consensus Estimate has moved north 3.9% to $2.67 per share for 2018, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 39.8% and 7.7%, respectively. Over the past year, shares of Boise Cascade have rallied 37.9%, outperforming the sector’s gain. The company currently sports a Zacks Rank #1 and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Continental Building Products, Inc. produces and sells gypsum complementary finishing and wallboard products in the United States and Canada. The company currently carries a Zacks Rank #1 and has a VGM Score of A. In the last four quarters, the company pulled off an average positive earnings surprise of 14.61%. The Zacks Consensus Estimate has moved north by 1.7% to $1.80 per share for 2018, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 35.3% and 5.5%, respectively. Over the past year, shares of Continental Building have rallied 18.1%, outperforming the sector’s gain.
Louisiana-Pacific Corporation (LPX - Free Report) manufactures building products for new home repair and modelling, construction and outdoor structures. The company carries a Zacks Rank #1 at present and a VGM Score of A. The trailing four-quarter average positive earnings surprise is 5.18%. The Zacks Consensus Estimate for 2018 earnings has been revised 6.5% upward to $2.79 per share, in the last 30 days. The projected year-over-year earnings and sales growth rate for this year is currently pegged at 19.7% and 3%, respectively. Over the past year, shares of Louisiana-Pacific have climbed 11.6%, outperforming the sector’s gain.
Patrick Industries, Inc. (PATK - Free Report) manufactures and sells building materials and products in the United States and Canada. The company presently carries a Zacks Rank #1 and a VGM Score of A. The last four-quarter average positive earnings surprise is 18.02%. The Zacks Consensus Estimate has moved 8.2% north to $4.51 per share for 2018, in the last 30 days. Notably, the company’s projected year over year earnings and sales growth rate for this year are currently pegged at 41.8% and 24%, respectively. Over the past year, shares of Patrick Industries rallied 17.6%, outperforming the sector’s gain.
United Rentals, Inc. (URI - Free Report) is a renowned equipment rental company in the global forum. The company currently holds a Zacks Rank #2 and has a VGM Score of B. Over the last four quarters, the company pulled off an average positive earnings surprise of 7.88%. The 2018 Zacks Consensus Estimate for earnings moved up 3.2% to $15.62 per share, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 47.5% and 13.9%, respectively. Over the past year, shares of United Rentals have rallied 42.6%, outperforming the sector’s gain.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
5 Construction Stocks to Tap Best Q1 GDP Growth Since 2015
U.S. GDP growth for the first three months of this year was reportedly the highest for any first quarter since 2015. At full employment, the economy is presently showcasing remarkable strength in both business and consumer confidence. The Federal Reserve is also anticipated to announce additional rate hikes this year, taking cues from a tight labor market scenario and a fiscal stimulus plan by the Trump administration.
A sign of robust economic momentum will likely bolster infrastructure spending in the United States. Against this backdrop, allocating your hard-earned money in selective construction stocks can prove to be a masterstroke.
Better-Than-Expected Growth
Last Friday, the Bureau of Economic Analysis (BEA) revealed that GDP growth rate was 2.3% for the January-March quarter, better than the 2% gain predicted by Wall Street analysts.
In the last four quarters, GDP growth rate averaged 2.9%, almost in line with 3% growth predicted by the Trump administration. However, the American economy slightly slowed in the three months ended March, on account of decelerated growth in consumer spending and “seasonal quirks”. It largely stemmed from seasonal amendment issues, relating to how BEA factors in abnormal changes in the U.S. economic activity. Nevertheless, the setback is presumed to be momentary against the milieu of heavy fiscal stimulus and stretched labor market conditions.
The economy’s aggregate productivity of goods and services topped expectations in the first quarter, sustaining hopes of a solid recoil for the rest of the year.
Trump’s Impetus
The first-quarter GDP reading is not a spot-on reflection of the U.S. economy; as the full impact of increased government spending and tax cuts has not yet materialized. Consumer spending growth braked at 1.1% in the first quarter due to delayed tax deferrals. The December Tax Cuts and Jobs Act bill was effectual in January and did not show in employees’ paychecks until late first quarter.
However, we notice that government spending advanced at a 1.2% rate in the January-March session and is expected to gain momentum from the second quarter, on the back of increased public expenditure lately approved by the U.S. Congress. The U.S. President’s promise of a $1.5-trillion fiscal stimulus program is likely to provide a lot of economic juice in the next couple of years.
The slowdown in first-quarter consumer spending was largely offset by 6.1% growth in corporate investment, reflecting upside in business inventory rebuilding and gains in oil and gas exploration. Investments of nonresidential structures also surged 12.3% in the quarter.
Moreover, on Friday, Trump highlighted a fresh section of his economic program, relating to America’s trade deficits with other major economies like Germany. A slight dip in deficit balance added 0.2% points to first-quarter GDP growth and is likely to support more gains going forward due to Trump’s focus on “fair” trade practices.
Fed Expectations
The Federal Reserve will likely shrug-off the repercussion of a tepid GDP growth rate in the first quarter. The Mar 20-21 minutes session revealed that policymakers "expected that the first-quarter softness would be transitory," on account of "residual seasonality in the data, and more generally to strong economic fundamentals."
The Fed has lifted interest rates to 1.75% last month and will possibly execute additional hikes this year to curb unwanted inflation in the economy. The U.S. economy is at its full employment and a stretched labor market will eventually push up inflation; as employers are trying to brave workforce shortages with higher wages. Notably, a report released on Friday disclosed that wages of U.S. private sector employees went up by 1% in the first quarter, marking the biggest quarterly rise in the last 11 years.
How to Play the Market
Increased public spending, lower tax rates, upbeat wage rates and reduced trade deficits will likely foster U.S. GDP growth in the future. Sturdier economic growth will augment aggregate construction spending in the United States. Per the Census Bureau, U.S. construction spending rose 4.4% year over year to $176.3 billion in the first two months of this year.
The Zacks Construction sector is currently placed at the top 19% out of the 16 Zacks sectors.
Per the latest Earnings Preview report, earnings and revenues of all construction stocks in the benchmark index will likely climb 46.7% and 17.3%, respectively, on a year-over-year basis in the first quarter.
In order to cash in on the solid growth potential of the sector, we have handpicked five construction stocks that will likely add a sparkle to your portfolio.
These companies carry a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and currently flaunt an attractive VGM Score of A or B. These stocks have pulled off a positive average earnings surprise for the last four quarters and the Zacks Consensus Estimate for first-quarter earnings has been revised upward for the current year over the last 30 days. Additionally, the attractiveness of these picks is further accentuated by positive sales and earnings forecast for this year. Notably, these companies have outperformed 5.7% gains recorded by the sector in the last year.
Let's dig a little deeper into these five choices to get a fair idea of their individual strength.
Boise Cascade Company (BCC - Free Report) manufactures and distributes wood products and building materials in the United States and Canada. The company has pulled off a positive average earnings surprise of 52.92% in the last four quarters. The Zacks Consensus Estimate has moved north 3.9% to $2.67 per share for 2018, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 39.8% and 7.7%, respectively. Over the past year, shares of Boise Cascade have rallied 37.9%, outperforming the sector’s gain. The company currently sports a Zacks Rank #1 and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Continental Building Products, Inc. produces and sells gypsum complementary finishing and wallboard products in the United States and Canada. The company currently carries a Zacks Rank #1 and has a VGM Score of A. In the last four quarters, the company pulled off an average positive earnings surprise of 14.61%. The Zacks Consensus Estimate has moved north by 1.7% to $1.80 per share for 2018, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 35.3% and 5.5%, respectively. Over the past year, shares of Continental Building have rallied 18.1%, outperforming the sector’s gain.
Louisiana-Pacific Corporation (LPX - Free Report) manufactures building products for new home repair and modelling, construction and outdoor structures. The company carries a Zacks Rank #1 at present and a VGM Score of A. The trailing four-quarter average positive earnings surprise is 5.18%. The Zacks Consensus Estimate for 2018 earnings has been revised 6.5% upward to $2.79 per share, in the last 30 days. The projected year-over-year earnings and sales growth rate for this year is currently pegged at 19.7% and 3%, respectively. Over the past year, shares of Louisiana-Pacific have climbed 11.6%, outperforming the sector’s gain.
Patrick Industries, Inc. (PATK - Free Report) manufactures and sells building materials and products in the United States and Canada. The company presently carries a Zacks Rank #1 and a VGM Score of A. The last four-quarter average positive earnings surprise is 18.02%. The Zacks Consensus Estimate has moved 8.2% north to $4.51 per share for 2018, in the last 30 days. Notably, the company’s projected year over year earnings and sales growth rate for this year are currently pegged at 41.8% and 24%, respectively. Over the past year, shares of Patrick Industries rallied 17.6%, outperforming the sector’s gain.
United Rentals, Inc. (URI - Free Report) is a renowned equipment rental company in the global forum. The company currently holds a Zacks Rank #2 and has a VGM Score of B. Over the last four quarters, the company pulled off an average positive earnings surprise of 7.88%. The 2018 Zacks Consensus Estimate for earnings moved up 3.2% to $15.62 per share, in the last 30 days. Notably, the company’s projected year-over-year earnings and sales growth rate for this year is currently pegged at 47.5% and 13.9%, respectively. Over the past year, shares of United Rentals have rallied 42.6%, outperforming the sector’s gain.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>