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Coronavirus Casts Gloom Over Building Maintenance Outlook
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The companies grouped under the Building Maintenance Services category are providers of a wide range of services, including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping and pest control.
Here are the industry’s three major themes:
Revenues and cash flows have remained fairly stable over the past several years, enabling industry participants to payout stable dividends. This is mainly because the companies offer services that consumers generally cannot delay.
However, the coronavirus-led lockdowns and social-distancing measures have caused a sharp diversion from this general trend. With almost all workplaces shut down and people staying indoors, maintenance services have come to almost a standstill.
The construction business, on which the industry is largely dependent upon, is also suffering due to a massively-distorted supply chain as well as lockdown-led project delays and cancellations. Decreased manufacturing output in China is affecting construction in the United States as nearly 30% of U.S. construction products come in from China.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Building Products - Maintenance Service, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #222. This rank places it in the bottom 13% of more than 250 Zacks industries.
The group’s Business Services, 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 moved 23.8% south.
Despite the gloomy 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 performance and current valuation.
Industry Lags the S&P 500 & Sector
Over the past year, the Zacks Building Products - Maintenance Service industry has underperformed the S&P 500 composite and the broader sector.
While the industry has declined 25.4%, the broader sector and the S&P 500 composite have been down 13.6% and 10.2% respectively.
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 31.78X, higher than the S&P 500’s 15.99X and the sector’s 20.44X.
Over the past five years, the industry has traded as high as 40.63X, as low as 18.48X and at a median of 27.21X.
Price to Forward 12 Months
Bottom Line
Supply-chain delays resulting from China’s aggressive containment actions could impact construction in the United States even after the pandemic ends. So, the industry might not be able to tide over the challenges in the near term and therefore, none of the stocks in our building maintenance universe currently carry a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nevertheless, we believe investors should retain ABM Industries Incorporated (ABM - Free Report) , Team, Inc. (TISI - Free Report) and Rollins, Inc. (ROL - Free Report) in their portfolios as these stocks currently carry a Zacks Rank #3 (Hold).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Coronavirus Casts Gloom Over Building Maintenance Outlook
The companies grouped under the Building Maintenance Services category are providers of a wide range of services, including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping and pest control.
Here are the industry’s three major themes:
Zacks Industry Rank Indicates Dull Prospects
The Zacks Building Products - Maintenance Service, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #222. This rank places it in the bottom 13% of more than 250 Zacks industries.
The group’s Business Services, 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 moved 23.8% south.
Despite the gloomy 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 performance and current valuation.
Industry Lags the S&P 500 & Sector
Over the past year, the Zacks Building Products - Maintenance Service industry has underperformed the S&P 500 composite and the broader sector.
While the industry has declined 25.4%, the broader sector and the S&P 500 composite have been down 13.6% and 10.2% respectively.
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 31.78X, higher than the S&P 500’s 15.99X and the sector’s 20.44X.
Over the past five years, the industry has traded as high as 40.63X, as low as 18.48X and at a median of 27.21X.
Price to Forward 12 Months
Bottom Line
Supply-chain delays resulting from China’s aggressive containment actions could impact construction in the United States even after the pandemic ends. So, the industry might not be able to tide over the challenges in the near term and therefore, none of the stocks in our building maintenance universe currently carry a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nevertheless, we believe investors should retain ABM Industries Incorporated (ABM - Free Report) , Team, Inc. (TISI - Free Report) and Rollins, Inc. (ROL - Free Report) in their portfolios as these stocks currently carry a Zacks Rank #3 (Hold).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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