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How the Construction Sector is Poised This Spring Season?
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Its been more than a year, the overall construction market, including the residential and non-residential market, has been experiencing supply-chain woes. Also, rising inflation, especially in material, labor and transportation, is a concern. The February reading of builders’ sentiment for newly-built single-family homes moved one point lower to 82, per the National Association of Home Builders/Wells Fargo Housing Market Index.
Spending on construction projects raised in January 2022, signalling positivity surrounding the industry. The January reading for the said metric improved 1.3% from December 2021 and 8.2% from a year ago.
Adding to the positive, the recent unemployment data, released by the U.S. Bureau of Labor Statistics, edged down to 3.8% in February, led by gains in leisure and hospitality, professional and business services, health care and construction.
The overall economy is recovering from COVID-19 and its variants’ impact. GDP for fourth-quarter 2021 increased at an annual rate of 7%, according to the "second" estimate released by the Bureau of Economic Analysis compared with a 2.3% rise in the third quarter.
Although the above-mentioned headwinds are ailing the housing and related industry over a year, improvement in the economy is likely to benefit homebuilders and other industrialists. The Fed’s intention to raise interest rates in 2022 to improve economic conditions post-pandemic is boosting housing sales as buyers are earger to invest in homes before the rate hike.
Apart from residential construction, non-residential construction is witnessing improvement, backed by the government's endeavor to boost investment in infrastructure construction, especially transportation (roads, ports, and bridges), water and sewerage and telecommunications. Also, the companies are well-positioned to gain from the renewable energy drive of the pro-environmental Biden administration.
Image Source: Zacks Investment Research
Shares of Lennar Corporation (LEN - Free Report) , NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) , Owens Corning (OC - Free Report) , Acuity Brands, Inc. (AYI - Free Report) and Dycom Industries, Inc. (DY - Free Report) have outperformed the Zacks Construction sector in the past year. All these companies are poised to maintain the bull run through 2022, given solid housing and economic backdrop.
Our Choices
Defying the major statistics downtrend witnessed in the housing industry, major industry bigwigs and homebuyers are optimistic and the improving economy will definitely add to the positives.
Our VGM Score is a complementary set of indicators used to better focus on the stocks that are the best fit for investors’ personal trading styles. Stocks with a Zacks Rank #1 or #2, which also has a Score of an A or a B, have the highest probability of success.
Lennar: This well-known homebuilder is benefiting from effective cost control and focus on making its homebuilding platform more efficient, leading to higher operating leverage.
Lennar’s earnings for fiscal 2022 are expected to rise 10.9% year over year to $15.82 per share. The Zacks Consensus Estimate for fiscal 2022 earnings has improved from $15.60 per share in the past 60 days. LEN's shares have moved up 1.1% in a year.
NVR: This leading homebuilder banks on a disciplined business model and focuses on maximizing liquidity as well as minimizing risks.
NVR’s shares have gained 4.7% in the past year. Earnings estimates for the current year have witnessed an upward revision in the past 30 days, indicating 39.8% year-over-year growth.
PulteGroup: This Atlanta-based homebuilder has been benefiting from a prudent land investment strategy, focus on entry-level buyers and returning more free cash flow to shareholders. PulteGroup’s annual land acquisition strategies have been resulting in improved volumes, revenues and profitability for quite some time now. The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
PulteGroup stock has gained 4.1% in the past year. That said, the Zacks Consensus Estimate for its 2022 earnings has been upwardly revised in the past 30 days to $10.12 per share. Earnings for 2022 are expected to increase 38.6%.
Owens Corning: Headquartered in Toledo, OH, Owens Corning is benefiting from market-leading businesses, innovative products and process technologies as well as capabilities. A positive momentum in residential end markets, particularly in the United States, improved manufacturing leverage and strong cost controls will likely help the company deliver solid results.
Owens Corning has gained 6.2% in the past year. OC has seen an upward estimate revision for 2022 earnings in the past seven days to $10.61 per share. The company’s earnings for 2022 are expected to increase 14.2%.
Acuity Brands: This Atlanta-based company benefits from a diversified portfolio of innovative lighting control solutions and energy-efficient luminaries. Also, its strategic initiatives to reorganize the business, geographic expansion and cost-saving moves bode well. Despite the global supply chain issues, higher sales along with price increases and product and productivity improvement are driving the business.
Acuity Brands has gained 40.4% in a year. Its earnings estimates for fiscal 2022 have moved upward in the past 60 days. Earnings for fiscal 2022 are expected to grow 14.9%.
Dycom: This specialty contracting firm has been aiding from extensive deployment of 1-gigabit wireline networks by major customers. Also, continuous contract flow from major customers will boost the company’s growth momentum.
Dycom has gained 5.8% over the past year. DY has seen an upward estimate revision for fiscal 2023 earnings over the past seven days to $3.06 per share. The company’s earnings for fiscal 2023 are expected to increase 101.3%.
Investors may also add Fastenal Company (FAST - Free Report) , which belongs to the Zacks Building Products - Retail industry, to their portfolio as it is directly related to the Construction sector and drives revenues on major housing activity.
Fastenal has been gaining from an increase in the mix of fastener sales. Industrial vending is one of the primary growth drivers for Fastenal. The company also implemented prudent cost control measures to curtail the pressure stemming from rising operating expenses. Fastenal is also working toward expanding its e-commerce presence. Shares of FAST have gained 20.8% in the past year compared with the industry’s 25.3% rally.
The Zacks Consensus Estimate for Fastenal’s earnings for the current year suggests an improvement of 11.9% from the year-ago period. It has seen an upward estimate revision for 2022 earnings in the past 60 days to $1.79 per share.
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How the Construction Sector is Poised This Spring Season?
Its been more than a year, the overall construction market, including the residential and non-residential market, has been experiencing supply-chain woes. Also, rising inflation, especially in material, labor and transportation, is a concern. The February reading of builders’ sentiment for newly-built single-family homes moved one point lower to 82, per the National Association of Home Builders/Wells Fargo Housing Market Index.
Spending on construction projects raised in January 2022, signalling positivity surrounding the industry. The January reading for the said metric improved 1.3% from December 2021 and 8.2% from a year ago.
Adding to the positive, the recent unemployment data, released by the U.S. Bureau of Labor Statistics, edged down to 3.8% in February, led by gains in leisure and hospitality, professional and business services, health care and construction.
The overall economy is recovering from COVID-19 and its variants’ impact. GDP for fourth-quarter 2021 increased at an annual rate of 7%, according to the "second" estimate released by the Bureau of Economic Analysis compared with a 2.3% rise in the third quarter.
Although the above-mentioned headwinds are ailing the housing and related industry over a year, improvement in the economy is likely to benefit homebuilders and other industrialists. The Fed’s intention to raise interest rates in 2022 to improve economic conditions post-pandemic is boosting housing sales as buyers are earger to invest in homes before the rate hike.
Apart from residential construction, non-residential construction is witnessing improvement, backed by the government's endeavor to boost investment in infrastructure construction, especially transportation (roads, ports, and bridges), water and sewerage and telecommunications. Also, the companies are well-positioned to gain from the renewable energy drive of the pro-environmental Biden administration.
Image Source: Zacks Investment Research
Shares of Lennar Corporation (LEN - Free Report) , NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) , Owens Corning (OC - Free Report) , Acuity Brands, Inc. (AYI - Free Report) and Dycom Industries, Inc. (DY - Free Report) have outperformed the Zacks Construction sector in the past year. All these companies are poised to maintain the bull run through 2022, given solid housing and economic backdrop.
Our Choices
Defying the major statistics downtrend witnessed in the housing industry, major industry bigwigs and homebuyers are optimistic and the improving economy will definitely add to the positives.
We have zeroed our findings with the help of the Zacks Stock Screener and selected the most appropriate stocks that are poised for the spring season. Notably, all these stocks carries a Zacks Rank #2 (Buy) and impressive VGM Score. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Our VGM Score is a complementary set of indicators used to better focus on the stocks that are the best fit for investors’ personal trading styles. Stocks with a Zacks Rank #1 or #2, which also has a Score of an A or a B, have the highest probability of success.
Lennar: This well-known homebuilder is benefiting from effective cost control and focus on making its homebuilding platform more efficient, leading to higher operating leverage.
Lennar’s earnings for fiscal 2022 are expected to rise 10.9% year over year to $15.82 per share. The Zacks Consensus Estimate for fiscal 2022 earnings has improved from $15.60 per share in the past 60 days. LEN's shares have moved up 1.1% in a year.
NVR: This leading homebuilder banks on a disciplined business model and focuses on maximizing liquidity as well as minimizing risks.
NVR’s shares have gained 4.7% in the past year. Earnings estimates for the current year have witnessed an upward revision in the past 30 days, indicating 39.8% year-over-year growth.
PulteGroup: This Atlanta-based homebuilder has been benefiting from a prudent land investment strategy, focus on entry-level buyers and returning more free cash flow to shareholders. PulteGroup’s annual land acquisition strategies have been resulting in improved volumes, revenues and profitability for quite some time now. The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
PulteGroup stock has gained 4.1% in the past year. That said, the Zacks Consensus Estimate for its 2022 earnings has been upwardly revised in the past 30 days to $10.12 per share. Earnings for 2022 are expected to increase 38.6%.
Owens Corning: Headquartered in Toledo, OH, Owens Corning is benefiting from market-leading businesses, innovative products and process technologies as well as capabilities. A positive momentum in residential end markets, particularly in the United States, improved manufacturing leverage and strong cost controls will likely help the company deliver solid results.
Owens Corning has gained 6.2% in the past year. OC has seen an upward estimate revision for 2022 earnings in the past seven days to $10.61 per share. The company’s earnings for 2022 are expected to increase 14.2%.
Acuity Brands: This Atlanta-based company benefits from a diversified portfolio of innovative lighting control solutions and energy-efficient luminaries. Also, its strategic initiatives to reorganize the business, geographic expansion and cost-saving moves bode well. Despite the global supply chain issues, higher sales along with price increases and product and productivity improvement are driving the business.
Acuity Brands has gained 40.4% in a year. Its earnings estimates for fiscal 2022 have moved upward in the past 60 days. Earnings for fiscal 2022 are expected to grow 14.9%.
Dycom: This specialty contracting firm has been aiding from extensive deployment of 1-gigabit wireline networks by major customers. Also, continuous contract flow from major customers will boost the company’s growth momentum.
Dycom has gained 5.8% over the past year. DY has seen an upward estimate revision for fiscal 2023 earnings over the past seven days to $3.06 per share. The company’s earnings for fiscal 2023 are expected to increase 101.3%.
Investors may also add Fastenal Company (FAST - Free Report) , which belongs to the Zacks Building Products - Retail industry, to their portfolio as it is directly related to the Construction sector and drives revenues on major housing activity.
Fastenal has been gaining from an increase in the mix of fastener sales. Industrial vending is one of the primary growth drivers for Fastenal. The company also implemented prudent cost control measures to curtail the pressure stemming from rising operating expenses. Fastenal is also working toward expanding its e-commerce presence. Shares of FAST have gained 20.8% in the past year compared with the industry’s 25.3% rally.
The Zacks Consensus Estimate for Fastenal’s earnings for the current year suggests an improvement of 11.9% from the year-ago period. It has seen an upward estimate revision for 2022 earnings in the past 60 days to $1.79 per share.