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Construction Spending Up in November on Solid Residential Market
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Construction spending in November rose 0.4% from October’s revised estimate, the US Census Bureau reported on Jan 2, 2024. However, the reported figure missed analysts’ expectations by 33.3%. Defying a decline in outlays on public projects, underlying strength in the sector and the recent Federal Government decision to stabilize interest rates is gaining traction. The reported metric also rose 11.3% from the November 2022 reading.
The private residential construction increased 1.1% month over month and 3.7% from the prior year’s levels. The improvement in new single-family construction in recent months, backed by a lack of existing home inventory, has contributed to the upside. Also, the Federal Government’s decision to stabilize interest rates and improvement in inflation is added bliss. The recent improvement marked the seventh consecutive monthly increase since April 2023.
Spending on public construction projects declined 0.7% from the October reading. While construction spending is stabilizing despite the higher borrowing costs, manufacturing continues to struggle.
Public construction spending increased 16.2% year over year, backed by a 10.1% increase in the residential market and 16.3% in the non-residential market.
Image Source: Zacks Investment Research
The Zacks Construction sector has risen 44.6% in the past year compared with the S&P 500 index’s 23.8% rally. The private residential construction market and repair and remodeling (R&R) activities have started improving recently. Increased government funding for infrastructure and carbon/ESG-related projects is an added positive for the sector.
The companies like Dream Finders Homes, Inc. (DFH - Free Report) , Century Communities (CCS - Free Report) , Martin Marietta Materials, Inc. (MLM - Free Report) , AECOM (ACM - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) are expected to strengthen more in 2024 on the back of these tailwinds.
On Dec 18, the National Association of Home Builders (NAHB)/Wells Fargo reported a three-point month-over-month improvement in the builder confidence for December in its recent Housing Market Index (HMI).
Inflation, which compelled the Fed to tighten monetary policy, is also improving of late. The annual inflation rate in the United States slowed to 3.1% in November from 3.2% in October, the lowest reading in trailing five months. The unemployment rate also edged down to 3.7% in November from October’s reading of 3.9%, per the U.S. Bureau of Labor Statistics.
Apart from the residential market, non-residential players are banking on strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments. Also, they are experiencing higher funding for carbon/ESG-related projects to pursue carbon capture and storage work. The R&R activity is showing a solid momentum of late.
A Look at the Above-Mentioned Stocks Performance
Dream Finders Homes: This Jacksonville, FL-based company’s land-light operating model and strategic position in high-growth markets, providing affordable homes to entry-level, first and second-time move-up homebuyers, are tailwinds. Also, the build-for-rent platform offers a consistent home delivery pipeline, which is less susceptible to temporary changes in demand from individual homebuyers.
DFH, currently sporting a Zacks Rank #1 (Strong Buy), has rallied 241.7% in a year. The Zacks Consensus Estimate for its 2024 earnings has been revised upward to $2.81 from $2.62 in the past 30 days. This reflects growth of 12.2% from the year-ago period’s levels on 3.5% higher revenues. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average being 131.6%. It currently has a VGM Score of B.
Century Communities: This Greenwood Village, CO-based company engages in the design, development, construction, marketing, and sale of single-family attached and detached homes. Century Communities continues to focus on increasing its community count and growth strategies. With the increasing market demand for homes, CCS began to reduce incentive offerings across the communities.
CCS currently carries a Zacks Rank #2 and jumped 58.8% over the past year. Nonetheless, the Zacks Consensus Estimate for its 2024 earnings has been upwardly revised to $8.78 per share from $8.59 over the past 30 days. Earnings for 2024 are expected to grow 18.1%. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 45.3%.
Martin Marietta: Based in Raleigh, NC, the aggregates and other heavy building materials supplier is benefiting from solid pricing across businesses amid low volume. Also, the business-mix portfolio, its discreetly curated coast-to-coast footprint and its prime focus on value-over-volume commercial strategy are commendable.
MLM, currently sports a Zacks Rank #1, has gained 38.6% in the past year. The 2024 earnings per share (EPS) estimate has increased to $21.03 from $21.02 in the past seven days. Earnings for 2024 are expected to rise 14%. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 37.3%.
AECOM: This leading solutions provider for supporting professional, technical and management solutions for diverse industries is capitalizing on increased infrastructure spending and a committed focus on digital initiatives, leading to a substantial rise in net service revenues and growth of its backlog.
ACM, currently carrying a Zacks Rank #2 (Buy), has gained 6.1% in the past year. The 2024 EPS estimate has increased to $4.89 from $4.73 in the past 60 days. Earnings for 2024 are expected to grow 12.2%. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average being 2.1%. It currently carries a VGM Score of A.
Gibraltar: This civil infrastructure company has also been riding on the back of solid demand for infrastructure services throughout end markets in both private and public sectors.
ROCK, currently carrying a Zacks Rank #2, has gained 70.8% in the past year. The 2024 EPS estimate has increased to $4.63 from $4.51 over the past 60 days. Earnings for 2024 are expected to grow 12.1%. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.8%. It currently carries a VGM Score of A.
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Construction Spending Up in November on Solid Residential Market
Construction spending in November rose 0.4% from October’s revised estimate, the US Census Bureau reported on Jan 2, 2024. However, the reported figure missed analysts’ expectations by 33.3%. Defying a decline in outlays on public projects, underlying strength in the sector and the recent Federal Government decision to stabilize interest rates is gaining traction. The reported metric also rose 11.3% from the November 2022 reading.
The private residential construction increased 1.1% month over month and 3.7% from the prior year’s levels. The improvement in new single-family construction in recent months, backed by a lack of existing home inventory, has contributed to the upside. Also, the Federal Government’s decision to stabilize interest rates and improvement in inflation is added bliss. The recent improvement marked the seventh consecutive monthly increase since April 2023.
Spending on public construction projects declined 0.7% from the October reading. While construction spending is stabilizing despite the higher borrowing costs, manufacturing continues to struggle.
Public construction spending increased 16.2% year over year, backed by a 10.1% increase in the residential market and 16.3% in the non-residential market.
Image Source: Zacks Investment Research
The Zacks Construction sector has risen 44.6% in the past year compared with the S&P 500 index’s 23.8% rally. The private residential construction market and repair and remodeling (R&R) activities have started improving recently. Increased government funding for infrastructure and carbon/ESG-related projects is an added positive for the sector.
The companies like Dream Finders Homes, Inc. (DFH - Free Report) , Century Communities (CCS - Free Report) , Martin Marietta Materials, Inc. (MLM - Free Report) , AECOM (ACM - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) are expected to strengthen more in 2024 on the back of these tailwinds.
On Dec 18, the National Association of Home Builders (NAHB)/Wells Fargo reported a three-point month-over-month improvement in the builder confidence for December in its recent Housing Market Index (HMI).
Inflation, which compelled the Fed to tighten monetary policy, is also improving of late. The annual inflation rate in the United States slowed to 3.1% in November from 3.2% in October, the lowest reading in trailing five months. The unemployment rate also edged down to 3.7% in November from October’s reading of 3.9%, per the U.S. Bureau of Labor Statistics.
Apart from the residential market, non-residential players are banking on strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments. Also, they are experiencing higher funding for carbon/ESG-related projects to pursue carbon capture and storage work. The R&R activity is showing a solid momentum of late.
A Look at the Above-Mentioned Stocks Performance
Dream Finders Homes: This Jacksonville, FL-based company’s land-light operating model and strategic position in high-growth markets, providing affordable homes to entry-level, first and second-time move-up homebuyers, are tailwinds. Also, the build-for-rent platform offers a consistent home delivery pipeline, which is less susceptible to temporary changes in demand from individual homebuyers.
DFH, currently sporting a Zacks Rank #1 (Strong Buy), has rallied 241.7% in a year. The Zacks Consensus Estimate for its 2024 earnings has been revised upward to $2.81 from $2.62 in the past 30 days. This reflects growth of 12.2% from the year-ago period’s levels on 3.5% higher revenues. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average being 131.6%. It currently has a VGM Score of B.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Century Communities: This Greenwood Village, CO-based company engages in the design, development, construction, marketing, and sale of single-family attached and detached homes. Century Communities continues to focus on increasing its community count and growth strategies. With the increasing market demand for homes, CCS began to reduce incentive offerings across the communities.
CCS currently carries a Zacks Rank #2 and jumped 58.8% over the past year. Nonetheless, the Zacks Consensus Estimate for its 2024 earnings has been upwardly revised to $8.78 per share from $8.59 over the past 30 days. Earnings for 2024 are expected to grow 18.1%. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 45.3%.
Martin Marietta: Based in Raleigh, NC, the aggregates and other heavy building materials supplier is benefiting from solid pricing across businesses amid low volume. Also, the business-mix portfolio, its discreetly curated coast-to-coast footprint and its prime focus on value-over-volume commercial strategy are commendable.
MLM, currently sports a Zacks Rank #1, has gained 38.6% in the past year. The 2024 earnings per share (EPS) estimate has increased to $21.03 from $21.02 in the past seven days. Earnings for 2024 are expected to rise 14%. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 37.3%.
AECOM: This leading solutions provider for supporting professional, technical and management solutions for diverse industries is capitalizing on increased infrastructure spending and a committed focus on digital initiatives, leading to a substantial rise in net service revenues and growth of its backlog.
ACM, currently carrying a Zacks Rank #2 (Buy), has gained 6.1% in the past year. The 2024 EPS estimate has increased to $4.89 from $4.73 in the past 60 days. Earnings for 2024 are expected to grow 12.2%. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average being 2.1%. It currently carries a VGM Score of A.
Gibraltar: This civil infrastructure company has also been riding on the back of solid demand for infrastructure services throughout end markets in both private and public sectors.
ROCK, currently carrying a Zacks Rank #2, has gained 70.8% in the past year. The 2024 EPS estimate has increased to $4.63 from $4.51 over the past 60 days. Earnings for 2024 are expected to grow 12.1%. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.8%. It currently carries a VGM Score of A.