With a strong housing market and the prospect for more growth in the future, many investors have taken a closer look at the homebuilders. However, the building products area could be a hidden source of profits in the months ahead, as they too could benefit from solid housing trends, though they have flown under the radar for the most part as of late.
A great example of this is in the
building products—wood industry , which currently is in the top 3% overall for the Zacks Industry Rank. This could be an area for investors to watch in the future, and especially if it keeps up its strong earnings estimate revision track. In fact, of the 10 companies in this industry, only one has a rank of ‘sell’ or worse. Where to Watch in This Market
But if you are looking for the cream of the crop in this group, you might not have to look any further than Boise Cascade (
BCC - Free Report) . This Idaho-based manufacturer and distributor of lumber and building materials could be a big beneficiary of a continued housing surge thanks to its in-demand products like plywood, particleboard and other word products and supplies.
In particular, investors should be watching this stock thanks to some of its recent earnings estimate revisions. The stock actually has an Earnings ESP of over 44% for the current quarter and an ESP of nearly 14% in the current year. These figures mean that the most recent estimates—arguably those with the most up-to-date information—are pricing in significantly better prospects for BCC in both the near and longer term time frames.
But don’t worry about these elevated expectations, as BCC has an amazing history in earnings season. In particular, the company has an average surprise of over 500% in the past four quarters, including a surprise profit last quarter when most were expecting a loss from the company.
Additionally, Boise Cascade has some great value metrics right now which includes an ‘A’ Grade on this front. This is partially due to its PE ratio which is lower than the industry average, but really, its PEG ratio is extremely impressive. Not only is it less than half of the industry average, but BCC’s PEG comes in under 1.3.
Add these impressive value stats with decent grades on the growth and momentum front, and it shouldn’t be surprising that Boise Cascade has a ‘B’ Grade for its overall VGM Score. And with some of its strong earnings estimate revisions and performances in earnings season, the stock was able to get the top Zacks Rank #1 (Strong Buy) too.
Housing stocks are arguably a crowded trade right now, but the space is definitely looking pretty promising as we head into the thick of the home buying season. And with some of the solid economic trends still at play, there is plenty of hope for this market in the longer term future too.
But if investors want to go beyond the headline companies and look for other potential winners, a great play might be to look into building product stocks. Not only will these benefit from the same housing trends, but they are looking great from a Zacks Industry Rank perspective too.
So, consider this market, and one of the top stocks in the segment in BCC, if you are looking for a value play with a different type of housing and construction exposure in 2017.
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