The Zacks Building Products - Maintenance Service industry comprises providers of a range of services including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning, plumbing, landscaping and pest control among others.
Here are the industry’s three major themes:
- Revenues, income and cash flows have been increasing for the past several years with expansion in the construction sector driven by rapid industrialization and urbanization. The metrics are expected to remain in good shape through the economic cycle as the industry participants offer services that consumers generally cannot delay.
- Demand environment is expected to remain stable through 2019 as the positives and negatives are roughly in balance. While the residential construction market continues to grapple with rising labor and materials costs that makes it more difficult to produce the smaller affordable apartments, commercial and other construction remain strong because of continued spending on lodging, data centers, warehouses, airports and K-12 schools.
- Strict Environmental, Health, and Safety (EHS) policies in North America and Europe should increase implementation of building maintenance services.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Building Products - Maintenance Service industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #185. This rank places it in the bottom 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 underperformance in the near term. 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 lowering their estimates. Over the past year, the industry’s consensus earnings estimate for 2019 has decreased 30.1%.
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 Lags S&P 500 and Sector
The Zacks Building Products - Maintenance Service Industry has underperformed the Zacks S&P 500 composite and the broader Zacks Business Services Sector over the past year.
The industry has witnessed 0.5% increase over the said period compared with the S&P 500 composite and the broader sector’s rise of 5% and 12.5%, respectively.
One-Year Price Performance
Industry’s Current Valuation
Comparing the industry with the Zacks 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 36.61X, higher than the S&P 500’s 17.23X and the sector’s 24.78X.
Over the past five years, the industry has traded as high as 40.63X, as low as 18.48X and at the median of 25X.
Price to Forward 12 Months
Robust construction activity in commercial and industrial sectors coupled with strict EHS policies offsets weakness in residential construction, thus keeping demand forbuilding maintenance services in good shape.
One stock in the Zacks Building Products - Maintenance Service space currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We have also mentioned two stocks from the industry, which we believe investors should retain in their portfolio, as these carry a Zacks Rank #3 (Hold).
Limbach Holdings, Inc. (LMB - Free Report) : The stock of this Pennsylvania-based provider of commercial specialty contract services has gained more than 100% year to date and carries a Zacks Rank #2. The Zacks Consensus Estimate for current year EPS has remained unchanged at $1.07 in the past 60 days.
Year-to-date Price Performance: LMB
ABM Industries Incorporated (ABM - Free Report) : The stock of this New York-based provider of integrated facility solutions has gained 30.6% year to date and carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has improved 4.1% in the past 60 days.
Year-to-date Price Performance: ABM
Team, Inc. (TISI - Free Report) : The stock of this Texas-based provider of specialty industrial services has gained 2.3% year to date and carries a Zacks Rank #3. The Zacks Consensus Estimate for the current year has remained unchanged at a loss of 12 cents in the past 60 days.
Year-to-date Price Performance: TISI