The Zacks Building Products - Miscellaneous industry continues to navigate challenges stemming from a weak real estate market and inflation-driven consumer uncertainty. The real estate market remained weak due to high mortgage rates, limited housing inventory, and affordability challenges, which deterred buyers and suppressed demand. Additionally, the industry is expected to face the heat arising from tariff-related cost inflation. Elevated input prices—particularly for iron, steel, and copper due to recent tariffs—are expected to compress margins across the industry.

Nonetheless, increased government infrastructure spending is bolstering companies in the industry. Although potential challenges like macroeconomic uncertainties, new product investments and rising raw material costs could squeeze margins, firms such as Quanex Building Products Corporation (NX Quick QuoteNX - Free Report) , Frontdoor, Inc. (FTDR Quick QuoteFTDR - Free Report) , Gibraltar Industries, Inc. (ROCK Quick QuoteROCK - Free Report) and Aspen Aerogels, Inc. (ASPN Quick QuoteASPN - Free Report) stand to gain from operational excellence, geographic and product diversification strategies, strategic acquisitions, and higher infrastructure investments.

Industry Description

The Zacks Building Products - Miscellaneous industry primarily comprises manufacturers, designers and distributors of home improvement and building products like ceiling systems, doors, windows, flooring and metal products. Some industry players provide solutions to rehabilitate the aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries. The companies also manufacture expansion joints and structural bearings, ventilation products, ground-mounted solar racking and commercial greenhouses, as well as mail storage (solutions including mailboxes along with package delivery products). Companies in this industrial cohort also rent out equipment to a diverse customer base, including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities.

4 Trends Shaping the Future of the Building Products Industry

Tariff Impact: The U.S. administration’s tariff policies are reshaping the U.S. building products industry by increasing costs, disrupting supply chains, and influencing consumer behavior. While these policies aim to bolster domestic manufacturing, the immediate effects include heightened inflation and challenges for builders and consumers alike. The increased costs of construction materials are contributing to broader inflationary pressures in the economy. The National Association of Home Builders estimates that such tariffs have already added around $10,900 to the cost of constructing a new home. According to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released in April, construction input costs surged for the third straight month in March, with prices rising at a 9.7% annualized pace in the first quarter of 2025, driven sharply by tariff-related pressures. Key materials such as iron and steel, steel mill products, and copper wire and cable each saw price jumps exceeding 5% in March alone. While near-term contractor activity remains supported by a strong backlog, persistent cost inflation and growing market uncertainty pose a threat to project viability. If elevated input prices continue, developers may delay or cancel projects, posing downside risks to construction sector margins, capital deployment, and earnings visibility through the remainder of 2025.

Rising Costs & Soft Residential Market: Inflationary headwinds with respect to transportation costs, material costs and energy costs have been a pressing concern. Also, rising labor costs are compressing margins. These are dampening the companies’ operating performance. Although the industry participants have been working to recover higher costs through various price increases, they expect this ongoing volatility in material and transportation costs to be a concern. Apart from higher raw material costs, the companies bear expenses related to product launches. If companies are unable to offset these costs through price increases or supply-chain initiatives, their profits may be affected.

The industry's outlook is closely tied to the U.S. housing and renovation markets. The residential real estate market has been facing several challenges, including elevated interest rates, which make it difficult for buyers to secure affordable mortgages. The challenging real estate environment, coupled with the effects of inflation on consumer confidence, has been weighing on industry players.

U.S. Administration’s Infrastructural Spending: The industry players are expected to benefit from strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments. The U.S. administration’s endeavor to rebuild the nation’s deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to aid the companies. Meanwhile, as the industry players’ business prospects are highly correlated with U.S. housing market conditions, improving residential construction markets are expected to drive growth. Builders are now cautiously optimistic for 2025 as the lack of existing inventory is shifting demand to the new home market, thereby driving the demand for companies’ products in the industry. Also, although the Federal Reserve reduced the rate (bringing it to a range of 4.25%-4.5%), mortgage rates remained elevated at 7%. The housing and repair markets could see a recovery driven by potential market stabilization and anticipated reductions in interest rates in 2025.

Operational Excellence, Product Innovation & Acquisitions: The industry participants have been undertaking strong cost-saving initiatives like business consolidation, system implementations, plant/branch closures, improvement in the global supply chain and headcount reductions to boost profitability. Industry participants have also been strategically investing in new products, sales and support services, digitally enabled solutions and advanced manufacturing capabilities to boost revenues. The companies are also following a systematic acquisition strategy to supplement organic growth and expand access to additional markets and products.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Building Products – Miscellaneous industry is a 29-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #139, which places it in the bottom 43% 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 bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since January 2025, the industry’s earnings estimates for 2025 have been revised downward to $4.66 from $5.24 per share.

Despite the industry’s blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Lags S&P 500 & Sector

The Zacks Building Products – Miscellaneous industry has underperformed the Zacks S&P 500 Composite and the broader Zacks Construction sector over the past year.

Over this period, the industry has lost 11.1%, below the broader sector’s 5.4% decrease. Meanwhile, the Zacks S&P 500 Composite has gained 9.1% over the same period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing building products’ stocks, the industry is trading at 15.27X versus the S&P 500’s 20.81X and the sector’s 17.33X.

Over the past five years, the industry has traded as high as 19.22X, as low as 10.32X and at a median of 15.87X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

4 Building Product Stocks to Buy Now

We have selected four stocks from the Zacks universe of building products that have solid growth prospects.

Quanex: Based in Houston, TX, this company provides components for the fenestration industry. Management’s focus on maintaining margin discipline across the business, supported by both the cost synergies from integration efforts and continued focus on operational efficiency, has been driving growth. The acquisition of Tyman, which closed on Aug. 1, 2024, has been contributing to its performance. This strategic move added $175.7 million in revenue during the first quarter, contributing to a 67.3% year-over-year increase in consolidated sales. The acquisition not only expanded the company’s geographic footprint and product portfolio but also enhanced overall scale, leading to increased operating leverage and margin expansion. The transaction was pivotal in reshaping Quanex’s earnings profile for the quarter.

Quanex, a Zacks Rank #1 (Strong Buy) stock, has lost 51.7% over the past year. Nonetheless, NX has seen an upward estimate revision for 2025 earnings to $2.55 from $2.18 per share over the past 60 days, depicting analysts’ optimism for the company’s prospects. The estimated figure indicates 16.4% year-over-year growth for 2025. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 115.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: NX

Frontdoor: Based in Memphis, TN, this company provides home warranties in the United States. The company is benefiting from its focus on new and innovative ways to boost demand for services, and the relaunch of the American Home Shield brand is a significant component of this strategy. The company’s continued emphasis on growing its member base, particularly in the DTC channel, has been driving growth. This is helped by effective digital marketing strategies, relaunch of the American Home Shield brand, targeted promotions, and improved customer segmentation, especially aimed at millennials. The company ended the quarter with 310,000 DTC members, marking a 15% increase year over year in the first quarter, including 4% organic growth. Frontdoor also has been gaining from its non-warranty businesses, including HVAC replacements, the Moen partnership, and contributions from the 2-10 acquisition.

Frontdoor, a Zacks Rank #2 (Buy) stock, has gained 48.7% over the past year. FTDR has seen an upward estimate revision for 2025 earnings to $3.29 from $3.01 per share over the past seven days. The estimated figure indicates a 1.8% year-over-year decline for 2025. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 69.9%. It currently holds a VGM Score of A.

Price and Consensus: FTDR

Gibraltar: Based in Buffalo, NY, Gibraltar manufactures and provides products and services for the residential, renewable energy, agtech, and infrastructure markets. Strong demand for controlled-environment agriculture, stable infrastructure supported by government investments, along with strategic expansions and operational discipline, has been helping Gibraltar offset the ongoing challenges associated with trade and regulatory uncertainty in the solar industry. Gibraltar has been benefiting from its focus on operational improvements and the Three-Pillar Strategy. The company continues to accelerate the implementation of three pillars through portfolio management initiatives, improvement of the business system and strengthening of the organization.

Gibraltar, a Zacks Rank #2 stock, has lost 22.3% over the past year. Nonetheless, ROCK has seen an upward estimate revision for 2025 earnings to $4.92 from $4.91 per share over the past seven days. The estimated EPS figure indicates 15.8% year-over-year growth for 2025. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 3.1%. It currently holds a VGM Score of A.

Price and Consensus: ROCK

Aspen Aerogels: This Northborough, MA-based company specializes in aerogel technology. Aspen's 2024 performance was driven by explosive growth in its PyroThin Thermal Barriers business, with revenues soaring to $307 million from $7 million in 2021 on strong OEM adoption, including General Motors, Mercedes-Benz, and Volvo Truck. Its Energy Industrial segment also delivered solid results, benefiting from a successful shift to external manufacturing and favorable demand in LNG and power markets. Operationally, Aspen enhanced profitability by scaling its East Providence facility, halting costly Plant II construction, and reducing fixed costs by $8 million per quarter. Financially, the company achieved 90% revenue growth, $90 million in adjusted EBITDA, and ended the year with over $220 million in cash. Aspen remains optimistic about long-term demand across both the EV and energy sectors.

Aspen, a Zacks Rank #2 stock, has lost 79.3% over the past year. Nonetheless, ASPN has seen an upward estimate revision for 2025 earnings to 19 cents from 17 cents per share over the past 60 days. The estimated EPS figure indicates a 59.6% year-over-year decline for 2025 but a solid 206.7% growth in 2026. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 176.1%. It currently holds a VGM Score of A.

Price and Consensus: ASPN