Construction sector started the earnings season on a positive note backed by robust housing market dynamics and infrastructural projects (comprising communications, transmission and power) despite coronavirus-led market disruptions. Prospering housing market fundamentals in the United States buoyed by the Fed’s dovish stance, low borrowing costs and lack of available supply are expected to have benefited the companies’ top lines. Indeed, severe cold weather, rise in lumber prices and a lack of supply took a toll on sales pace, pushed average home prices higher on a nationwide basis and resulted in weak U.S. housing data for February. Nonetheless, builders have been witnessing higher demand amid the COVID 19 pandemic, with Americans seeking more space for offices and classrooms. Meanwhile, a number of project awards across multiple business segments — including communications, transmission and power — along with infrastructural projects in domestic as well as international markets also contributed significantly to the companies’ performance. Again, increasing defense spending in major economies like the United States, rising public investments in water infrastructure and utility plants as well as encouraging prospects in the healthcare market are expected to have acted as tailwinds. However, inclement weather conditions in February and higher raw material costs (especially lumber) are likely to have affected the company’s margins. Additionally, higher land and labor costs along with the shortage of home supplies may have been risks. Record low inventory level has been deterring prospective buyers, especially first-timers. Overall Prediction
Per the latest
Earnings Outlook, construction sector earnings are expected to grow 39.5% year over year for the first quarter, indicating an increase from 31.5% growth in fourth-quarter 2020. Revenues are projected to increase 8.3% year over year, suggesting a decline from 11.7% growth in the fourth quarter. Notable Recent Releases
Some notable construction companies like
Fastenal Company ( FAST Quick Quote FAST - Free Report) , NVR, Inc. ( NVR Quick Quote NVR - Free Report) and D.R. Horton, Inc. ( DHI Quick Quote DHI - Free Report) recently released quarterly numbers. Fastenal’s first-quarter 2021 earnings met the Zacks Consensus Estimate but revenues missed the same. NVR reported better-than-expected results for first-quarter 2021. Earnings not only beat estimates for the third straight quarter but also improved significantly year over year. D.R. Horton reported better-than-expected results for first-quarter 2021, wherein earnings and revenues topped the Zacks Consensus Estimate. The quarterly results benefited from industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands. Construction Stocks to Watch
Let’s take a quick glance at how the following construction stocks are poised ahead of their first-quarter earnings releases on Apr 26.
Our proven model shows that companies with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have higher chances of beating earnings estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. PotlatchDeltic Corporation ( PCH Quick Quote PCH - Free Report) is slated to report quarterly results after the closing bell. In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 2.8% and 14.5%, respectively. Markedly, its earnings surpassed expectations in three of the last four quarters, with the average surprise being 142%, as shown in the chart below:
Similar to PotlatchDeltic, the chances of Lennox delivering an earnings beat for the first quarter are high, as it has an Earnings ESP of +1.50% and a Zacks Rank #3. You can see
. the complete list of today’s Zacks #1 Rank stocks here The Zacks Consensus Estimate for Lennox’s first-quarter earnings is pegged at $1.29 per share, implying 130.4% growth on a year-over-year basis. The consensus estimate for revenues is $788.6 million, indicating a 9% year-over-year increase. Otis Worldwide Corporation ( OTIS Quick Quote OTIS - Free Report) is slated to report quarterly results before the opening bell. In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 11.9% and 3%, respectively. Markedly, its earnings surpassed expectations in all the last four quarters, with the average being 22.7%, as shown in the chart below:
Its chances of delivering an earnings beat are low this time around as it has a Zacks Rank #2 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for Otis’ first-quarter earnings is pegged at 62 cents per share, implying 3.3% growth on a year-over-year basis. The consensus estimate for revenues is $3.13 billion, indicating a 5.7% year-over-year increase. Simpson Manufacturing Co., Inc. ( SSD Quick Quote SSD - Free Report) is slated to report quarterly results after the closing bell. In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 4.6% and 5.3%, respectively. Markedly, its earnings surpassed expectations in all the last four quarters, with the average being 41%, as shown in the chart below:
Its chances of delivering an earnings beat are also low this time around as it has a Zacks Rank #3 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for Simpson’s first-quarter earnings is pegged at 92 cents per share, implying 10.8% growth on a year-over-year basis. The consensus estimate for revenues is $327.2 million, indicating a 15.4% year-over-year increase. Zacks Top 10 Stocks for 2021
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