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4 Retail Building Products Stocks to Watch Amid Rising Demand
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The Zacks Building Products – Retail industry has been gaining from favorable trends in the housing market. Players in the space have also been gaining from consumers' increased focus on home renovation and maintenance projects undertaken amid the coronavirus pandemic. Apart from these, companies are investing toward boosting omni-channel capabilities, as consumers inclination toward digital transactions continue to rise.
Continuation of such upsides is likely to benefit industry participants like The Home Depot, Inc. (HD - Free Report) , Lowe’s Companies Inc. (LOW - Free Report) , Fastenal Company (FAST - Free Report) and Lumber Liquidators Holdings, Inc. (LL - Free Report) .
About the Industry
The Zacks Building Products – Retail industry comprises U.S. home improvement retailers, manufactures of industrial and construction materials and distributors of wallboard and ceilings systems. Some of the industry participants also offer products and services for home decoration, repair and remodeling, and in-home delivery and installation services.
The industry players provide a wide array of products, ranging from cement or concrete foundation materials to roofing boards and shingles. The companies also sell lumber, insulation materials, drywall, plumbing fixtures, hard-surface flooring, lawn and garden, and decor products. Some players also deal in threaded fastener products, and manufactured and natural stone tiles. The industry players cater to professional homebuilders, sub-contractors, remodelers and consumers.
3 Trends Shaping the Future of Building Products Industry
Robust Housing Market: The Retail Building Products industry prospects are closely tied to the conditions prevailing in the U.S. housing market. Markedly, low mortgage rates and high demand for residential property are helping to keep the housing market up and booming, amid the coronavirus pandemic. New home sales and existing home sales rose 15.2% and 22%, respectively, in December, on a year-over-year basis. Continued rise in consumers’ home buying activities is expected to work in favor of players in the retail building products space.
Surging Repair & Remodeling Activities: With majority time being spent indoors due to the pandemic, there is rising focus on making homes an enjoyable and comfortable space. Consumers have been investing in making homes well equipped for work-from-home, remote schooling and entertainment needs. Moreover, do-it-yourself (DIY) projects for remodeling, decorating and maintenance of furniture and fixtures are being widely undertaken. There has also been higher demand for gardening-related tools. Moreover, products related to stay-at-home activities such as paint and tool kits are being highly preferred. Retail building products companies have therefore been ramping up production to meet rising demand. Such upsides along with rapid urbanization trends should keep aiding the top-line performance of the industry participants. Meanwhile, some home improvement retailers are incurring additional costs to provide enhanced payments and other benefits to employees amid the pandemic. Such increased costs are likely to put pressure on margins.
Focus on Digitization: Retail Building Products industry participants have been focusing on digitization and innovation. The industry participants have been on track with strategies to bolster omni-channel capabilities, with improved customer engagement. In fact, such prudent measures have been helping to meet the accelerated demand conditions amid the pandemic. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Professional (Pro) customer. The boom in digital transactions should continue to drive the top line of key industry players.
Zacks Industry Rank Indicates Solid Prospects
The Building Products – Retail industry is housed within the broader Zacks Retail-Wholesale sector. The industry currently carries a Zacks Industry Rank #69, which places it in the top 27% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of September 2020, the industry’s earnings estimate for 2021 has increased 5.2%.
Given the industry’s encouraging prospects, we present a few stocks that you may want to consider for your portfolio. But before that it’s worth taking a look at the industry’s stock-market performance and current valuation.
Industry Vs. Broader Market
The Zacks Building Products – Retail industry has outperformed the Zacks S&P 500 but has underperformed the broader Zacks Retail-Wholesale sector over the past year.
The industry has gained 20.8% over this period compared with the S&P 500’s rise of 18.5%. Meanwhile, the broader sector has moved up 33.9% in the said time frame.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is the commonly used multiple for valuing Retail-Wholesale stocks, the industry is currently trading at 21X compared with the S&P 500’s 22.94X. Further, the sector’s forward-12-month P/E stands at 31.61X.
Over the last five years, the industry has traded as high as 23.66X and as low as 16.06X, with the median being at 19.03X as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Building Products Stocks to Keep a Close Eye on
Lumber Liquidators: This Richmond, VA-based company is a leading specialty retailer of hard-surface flooring materials and accessories. The company, which currently carries a Zacks Rank #2 (Buy), has been gaining from its transformational plans and measures to boost financial flexibility. Higher demand for home improvement projects from pro and install customers has been supporting the company’s revenues. Additionally, the company has been undertaking prudent measures to boost shopping experience in stores and online. Impressively, the stock has increased 257.7% in a year. Notably, the Zacks Consensus Estimate for 2021 sales indicates a rise of 6.9% from the year-ago period’s levels. The consensus mark for 2021 earnings has improved 2.7% over the past 30 days.
Lowe’s Companies: The Mooresville, NC-based leading home improvements retailer has been gaining from its sturdy U.S. home-improvement business along with advancements in the digital channel. The company is working toward boosting contactless delivery operations and is on track with efforts to install self-service pickup lockers across stores. It is undertaking measures to boost sales to DIY and pro customers. It also strives to augment pro-focused brands. Impressively, shares of this Zacks Rank #3 (Hold) company have rallied 41.3% in a year. The Zacks Consensus Estimate for fiscal 2021 earnings has inched up 0.9% in the past 30 days.
Price and Consensus: LOW
The Home Depot: This Atlanta, GA-based home improvement retailer has been gaining from increased renovation and maintenance projects amid the pandemic. The company is ramping up assortments and delivery systems to effectively meet market needs. Moreover, the company follows a flexible interconnected infrastructure, which aids in quickly adapting to changing customer preferences. This Zacks Rank #3 company is gaining from broad-based strength across stores and geographies as well as growing presence in the digital arena. The company is working toward boosting omni-channel functions such as curbside pickup and buy online pickup in store services with convenient pickup lockers. The stock has gained about 13.2% in a year. The Zacks Consensus Estimate for fiscal 2021 sales indicates a rise of 0.6% from the year-ago period. The consensus mark for 2021 earnings has improved 0.7% over the past 30 days.
Price and Consensus: HD
Fastenal Company: This Winona, MN-based wholesale distributor of industrial and construction products has been gaining from the installation of vending machines. Further, this Zacks Rank #3 company is striving to boost onsite locations portfolio. The company has also implemented prudent cost control measures to curtail pressure stemming from rising operating expenses. Fastenal is also working toward expanding e-commerce presence. Notably, the Zacks Consensus Estimate for 2021 sales indicates a rise of 4.5% from the year-ago period’s levels. The consensus mark for 2021 earnings has improved 1.9% over the past 30 days. Impressively, the stock has rallied about 23.7% in the past year.
Price and Consensus: FAST
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 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.
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4 Retail Building Products Stocks to Watch Amid Rising Demand
The Zacks Building Products – Retail industry has been gaining from favorable trends in the housing market. Players in the space have also been gaining from consumers' increased focus on home renovation and maintenance projects undertaken amid the coronavirus pandemic. Apart from these, companies are investing toward boosting omni-channel capabilities, as consumers inclination toward digital transactions continue to rise.
Continuation of such upsides is likely to benefit industry participants like The Home Depot, Inc. (HD - Free Report) , Lowe’s Companies Inc. (LOW - Free Report) , Fastenal Company (FAST - Free Report) and Lumber Liquidators Holdings, Inc. (LL - Free Report) .
About the Industry
The Zacks Building Products – Retail industry comprises U.S. home improvement retailers, manufactures of industrial and construction materials and distributors of wallboard and ceilings systems. Some of the industry participants also offer products and services for home decoration, repair and remodeling, and in-home delivery and installation services.
The industry players provide a wide array of products, ranging from cement or concrete foundation materials to roofing boards and shingles. The companies also sell lumber, insulation materials, drywall, plumbing fixtures, hard-surface flooring, lawn and garden, and decor products. Some players also deal in threaded fastener products, and manufactured and natural stone tiles. The industry players cater to professional homebuilders, sub-contractors, remodelers and consumers.
3 Trends Shaping the Future of Building Products Industry
Robust Housing Market: The Retail Building Products industry prospects are closely tied to the conditions prevailing in the U.S. housing market. Markedly, low mortgage rates and high demand for residential property are helping to keep the housing market up and booming, amid the coronavirus pandemic. New home sales and existing home sales rose 15.2% and 22%, respectively, in December, on a year-over-year basis. Continued rise in consumers’ home buying activities is expected to work in favor of players in the retail building products space.
Surging Repair & Remodeling Activities: With majority time being spent indoors due to the pandemic, there is rising focus on making homes an enjoyable and comfortable space. Consumers have been investing in making homes well equipped for work-from-home, remote schooling and entertainment needs. Moreover, do-it-yourself (DIY) projects for remodeling, decorating and maintenance of furniture and fixtures are being widely undertaken. There has also been higher demand for gardening-related tools. Moreover, products related to stay-at-home activities such as paint and tool kits are being highly preferred. Retail building products companies have therefore been ramping up production to meet rising demand. Such upsides along with rapid urbanization trends should keep aiding the top-line performance of the industry participants. Meanwhile, some home improvement retailers are incurring additional costs to provide enhanced payments and other benefits to employees amid the pandemic. Such increased costs are likely to put pressure on margins.
Focus on Digitization: Retail Building Products industry participants have been focusing on digitization and innovation. The industry participants have been on track with strategies to bolster omni-channel capabilities, with improved customer engagement. In fact, such prudent measures have been helping to meet the accelerated demand conditions amid the pandemic. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Professional (Pro) customer. The boom in digital transactions should continue to drive the top line of key industry players.
Zacks Industry Rank Indicates Solid Prospects
The Building Products – Retail industry is housed within the broader Zacks Retail-Wholesale sector. The industry currently carries a Zacks Industry Rank #69, which places it in the top 27% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of September 2020, the industry’s earnings estimate for 2021 has increased 5.2%.
Given the industry’s encouraging prospects, we present a few stocks that you may want to consider for your portfolio. But before that it’s worth taking a look at the industry’s stock-market performance and current valuation.
Industry Vs. Broader Market
The Zacks Building Products – Retail industry has outperformed the Zacks S&P 500 but has underperformed the broader Zacks Retail-Wholesale sector over the past year.
The industry has gained 20.8% over this period compared with the S&P 500’s rise of 18.5%. Meanwhile, the broader sector has moved up 33.9% in the said time frame.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is the commonly used multiple for valuing Retail-Wholesale stocks, the industry is currently trading at 21X compared with the S&P 500’s 22.94X. Further, the sector’s forward-12-month P/E stands at 31.61X.
Over the last five years, the industry has traded as high as 23.66X and as low as 16.06X, with the median being at 19.03X as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Building Products Stocks to Keep a Close Eye on
Lumber Liquidators: This Richmond, VA-based company is a leading specialty retailer of hard-surface flooring materials and accessories. The company, which currently carries a Zacks Rank #2 (Buy), has been gaining from its transformational plans and measures to boost financial flexibility. Higher demand for home improvement projects from pro and install customers has been supporting the company’s revenues. Additionally, the company has been undertaking prudent measures to boost shopping experience in stores and online. Impressively, the stock has increased 257.7% in a year. Notably, the Zacks Consensus Estimate for 2021 sales indicates a rise of 6.9% from the year-ago period’s levels. The consensus mark for 2021 earnings has improved 2.7% over the past 30 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: LL
Lowe’s Companies: The Mooresville, NC-based leading home improvements retailer has been gaining from its sturdy U.S. home-improvement business along with advancements in the digital channel. The company is working toward boosting contactless delivery operations and is on track with efforts to install self-service pickup lockers across stores. It is undertaking measures to boost sales to DIY and pro customers. It also strives to augment pro-focused brands. Impressively, shares of this Zacks Rank #3 (Hold) company have rallied 41.3% in a year. The Zacks Consensus Estimate for fiscal 2021 earnings has inched up 0.9% in the past 30 days.
Price and Consensus: LOW
The Home Depot: This Atlanta, GA-based home improvement retailer has been gaining from increased renovation and maintenance projects amid the pandemic. The company is ramping up assortments and delivery systems to effectively meet market needs. Moreover, the company follows a flexible interconnected infrastructure, which aids in quickly adapting to changing customer preferences. This Zacks Rank #3 company is gaining from broad-based strength across stores and geographies as well as growing presence in the digital arena. The company is working toward boosting omni-channel functions such as curbside pickup and buy online pickup in store services with convenient pickup lockers. The stock has gained about 13.2% in a year. The Zacks Consensus Estimate for fiscal 2021 sales indicates a rise of 0.6% from the year-ago period. The consensus mark for 2021 earnings has improved 0.7% over the past 30 days.
Price and Consensus: HD
Fastenal Company: This Winona, MN-based wholesale distributor of industrial and construction products has been gaining from the installation of vending machines. Further, this Zacks Rank #3 company is striving to boost onsite locations portfolio. The company has also implemented prudent cost control measures to curtail pressure stemming from rising operating expenses. Fastenal is also working toward expanding e-commerce presence. Notably, the Zacks Consensus Estimate for 2021 sales indicates a rise of 4.5% from the year-ago period’s levels. The consensus mark for 2021 earnings has improved 1.9% over the past 30 days. Impressively, the stock has rallied about 23.7% in the past year.
Price and Consensus: FAST
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 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 >>