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3 Top Stocks From the Flourishing Building Maintenance Industry
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Strength in the construction business, along with a rise in manufacturing and service activities, is enabling the Zacks Building Products - Maintenance Services industry to support the demand environment that is getting healthier.
Service essentiality, technology and capital-management measures are aiding and ABM Industries Incorporated (ABM - Free Report) , Rollins, Inc. (ROL - Free Report) , Team, Inc. (TISI - Free Report) to sail through these testing times.
About the Industry
Companies grouped under the Zacks Building Products - Maintenance Services category provide a wide range of services, including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping, and pest control. The industry is steadily recovering from the pandemic-induced weakness with demand for services shooting up in the residential, commercial and public buildings, as well as in various industries, across the globe. In the United States, strength in the manufacturing and service activities is aiding this space. As services are essential in nature and cannot be delayed or canceled, demand for the same is likely to accelerate drastically post the pandemic helping the industry players quickly recover from the pandemic-induced supply-chain disruptions and negative financial impact.
What's Shaping the Future of the Building Maintenance Industry?
Demand Expansion: Revenues, income and cash flows have been increasing for the past several years, mainly because the companies offer services that consumers generally cannot delay. This has enabled most industry players to increase dividends.
Manufacturing and Service in the Pink: With both manufacturing and service activities gathering steam, demand for building maintenance services is anticipated to rise steadily. Although the economic activity in the manufacturing sector shrunk 1.1% from June to July with the Manufacturing PMI measured by the Institute for Supply Management (ISM) touching 59.5%, the reading of above 50% marked the 14th consecutive month of expansion after April 2020’s contraction that had interrupted an impressive growth rally of 131 consecutive months. Non-manufacturing activities clocked 4% growth from June to July, as the Services PMI measured by the ISM touched the all-time high of 64.1%. This is the 14th consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
Reviving Construction Spending: The construction business, on which the industry is largely dependent upon, is gradually recovering from the pandemic-induced weakness. Per the latest release by the U.S. Census Bureau, construction spending during June 2021 was estimated at a seasonally-adjusted annual rate of $1,552.2 billion, up 0.1% from the May 2021 estimate. During the first six months of this year, construction spending rose 5.4% from the same period in 2020.
Zacks Industry Rank Indicates Bright Prospects
The Building Products - Maintenance Service industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #119. This rank places it in the top 47% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth 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 sell-side analysts covering the companies in this industry have been steadily pushing their estimates north. Over the past year, the industry’s consensus earnings estimate for 2021 has moved 25% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms the Sector, Lags S&P 500
Over the past year, the Zacks Building Products - Maintenance Service industry has outperformed the broader sector but lagged the S&P 500 composite.
While the industry has appreciated 6.5%, the S&P 500 composite has rallied 29.2%. The broader sector has declined 22.8% during the same time period.
One-Year Price Performance
Industry's Current Valuation
Comparing the industry with the S&P 500 composite on the basis of forward 12-month price-to-earnings (P/E), which is a commonly-used multiple for the industry, we see that the industry trades at 40.23X, higher than the S&P 500’s 21.76X and the sector’s 30.84X.
Over the past five years, the industry has traded as high as 72.32X, as low as 38.04X and at a median of 41.65X.
ABM Industries Incorporated: This integrated facility solutions provider currently carries a Zacks Rank of 2. The company is benefiting from its centralized key functional areas and reinforced sales capabilities. It has been investing in service delivery tools and processes for supporting the standard operating practices that are important for its long-term success.
ABM's strategy entails growth through acquisitions, while maintaining desirable profit margins. The acquisition of GCA Services Group has expanded its long-term operational and financial position, and is making significant contributions to the overall operational results predominantly within the Technology & Manufacturing, Business & Industry and Education segments.
The Zacks Consensus Estimate for fiscal 2021 EPS has moved 2.7% north in 60 days’ time. The stock has rallied 11.6% in the past six months.
Price and Consensus: ABM
Rollins, Inc.: This leading pest and termite control services provider is benefiting from its balanced approach to organic and inorganic growth. The company’s organic revenue growth rate is healthy, backed by solid technician and customer retention. Also, acquisitions are a major growth catalyst in Rollins’ business strategy.
Rollins currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the ongoing-year EPS has moved up 6.2% in the past 60 days. The stock has appreciated 14.9% in the past six months.
Price and Consensus: ROL
Team, Inc.: This global provider of asset performance assurance and optimization solutions utilizes its asset-light and scalable operating structure, and the depth and breadth of its products and services to meet business demands. The company is focused on cost saving, cash conservation and generation of free cash flow. Team carries a Zacks Rank of 3, at present.
Price and Consensus: TISI
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3 Top Stocks From the Flourishing Building Maintenance Industry
Strength in the construction business, along with a rise in manufacturing and service activities, is enabling the Zacks Building Products - Maintenance Services industry to support the demand environment that is getting healthier.
Service essentiality, technology and capital-management measures are aiding and ABM Industries Incorporated (ABM - Free Report) , Rollins, Inc. (ROL - Free Report) , Team, Inc. (TISI - Free Report) to sail through these testing times.
About the Industry
Companies grouped under the Zacks Building Products - Maintenance Services category provide a wide range of services, including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping, and pest control. The industry is steadily recovering from the pandemic-induced weakness with demand for services shooting up in the residential, commercial and public buildings, as well as in various industries, across the globe. In the United States, strength in the manufacturing and service activities is aiding this space. As services are essential in nature and cannot be delayed or canceled, demand for the same is likely to accelerate drastically post the pandemic helping the industry players quickly recover from the pandemic-induced supply-chain disruptions and negative financial impact.
What's Shaping the Future of the Building Maintenance Industry?
Demand Expansion: Revenues, income and cash flows have been increasing for the past several years, mainly because the companies offer services that consumers generally cannot delay. This has enabled most industry players to increase dividends.
Manufacturing and Service in the Pink: With both manufacturing and service activities gathering steam, demand for building maintenance services is anticipated to rise steadily. Although the economic activity in the manufacturing sector shrunk 1.1% from June to July with the Manufacturing PMI measured by the Institute for Supply Management (ISM) touching 59.5%, the reading of above 50% marked the 14th consecutive month of expansion after April 2020’s contraction that had interrupted an impressive growth rally of 131 consecutive months. Non-manufacturing activities clocked 4% growth from June to July, as the Services PMI measured by the ISM touched the all-time high of 64.1%. This is the 14th consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
Reviving Construction Spending: The construction business, on which the industry is largely dependent upon, is gradually recovering from the pandemic-induced weakness. Per the latest release by the U.S. Census Bureau, construction spending during June 2021 was estimated at a seasonally-adjusted annual rate of $1,552.2 billion, up 0.1% from the May 2021 estimate. During the first six months of this year, construction spending rose 5.4% from the same period in 2020.
Zacks Industry Rank Indicates Bright Prospects
The Building Products - Maintenance Service industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #119. This rank places it in the top 47% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth 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 sell-side analysts covering the companies in this industry have been steadily pushing their estimates north. Over the past year, the industry’s consensus earnings estimate for 2021 has moved 25% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms the Sector, Lags S&P 500
Over the past year, the Zacks Building Products - Maintenance Service industry has outperformed the broader sector but lagged the S&P 500 composite.
While the industry has appreciated 6.5%, the S&P 500 composite has rallied 29.2%. The broader sector has declined 22.8% during the same time period.
One-Year Price Performance
Industry's Current Valuation
Comparing the industry with the S&P 500 composite on the basis of forward 12-month price-to-earnings (P/E), which is a commonly-used multiple for the industry, we see that the industry trades at 40.23X, higher than the S&P 500’s 21.76X and the sector’s 30.84X.
Over the past five years, the industry has traded as high as 72.32X, as low as 38.04X and at a median of 41.65X.
Price to Forward 12 Month P/E Ratio
3 Building Maintenance Stocks to Consider
We present three stocks that currently carry a Zacks Rank #2 (Buy) or a Zacks Rank #3 (Hold), and are well positioned for near-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
ABM Industries Incorporated: This integrated facility solutions provider currently carries a Zacks Rank of 2. The company is benefiting from its centralized key functional areas and reinforced sales capabilities. It has been investing in service delivery tools and processes for supporting the standard operating practices that are important for its long-term success.
ABM's strategy entails growth through acquisitions, while maintaining desirable profit margins. The acquisition of GCA Services Group has expanded its long-term operational and financial position, and is making significant contributions to the overall operational results predominantly within the Technology & Manufacturing, Business & Industry and Education segments.
The Zacks Consensus Estimate for fiscal 2021 EPS has moved 2.7% north in 60 days’ time. The stock has rallied 11.6% in the past six months.
Price and Consensus: ABM
Rollins, Inc.: This leading pest and termite control services provider is benefiting from its balanced approach to organic and inorganic growth. The company’s organic revenue growth rate is healthy, backed by solid technician and customer retention. Also, acquisitions are a major growth catalyst in Rollins’ business strategy.
Rollins currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the ongoing-year EPS has moved up 6.2% in the past 60 days. The stock has appreciated 14.9% in the past six months.
Price and Consensus: ROL
Team, Inc.: This global provider of asset performance assurance and optimization solutions utilizes its asset-light and scalable operating structure, and the depth and breadth of its products and services to meet business demands. The company is focused on cost saving, cash conservation and generation of free cash flow. Team carries a Zacks Rank of 3, at present.
Price and Consensus: TISI