Despite a weak start to this year amid volatility in the U.S. market and global uncertainty, the construction sector seems to be doing well on the back of strong housing fundamentals. The housing industry has been stable despite volatility in the U.S. stock market, uncertainty surrounding the Fed rate hike, panic in the global financial markets triggered by the unexpected Brexit vote and volatile gasoline prices. In fact, the housing market fared much better in the spring selling season than in the past year. Moreover, construction activity picks up in the summer months, when the weather is favorable.
Also, stronger job data for June is encouraging. The month saw an addition of 287,000 jobs in the market, the highest in eight months. With improved job prospects and historically low mortgage rates, more and more young adults will opt to purchase their own homes. This will eventually drive revenues in the homebuilding space. In addition, the home remodeling market is also picking up pace. This increase in home construction not only benefits homebuilders but also spurs demand for homebuilding materials, home decoration products and other related businesses. This, in turn, bolsters the growth prospects of companies manufacturing these products. Stocks for Your Portfolio With the construction sector gaining momentum, it makes sense to pick stocks from this space. Here we have picked four such stocks based on a favorable Zacks Rank and impressive earnings history. CEMEX, S.A.B. de C.V. ( CX - Free Report) Based in Mexico, Cemex is a global building materials company, with operations across Americas, Europe, Africa, the Middle East, and Asia. Cemex has a huge international presence with trade relationships in over 100 nations. The company enjoys strong pricing in most of the markets. In the U.S, the company is capitalizing on strong demand trends in private construction and higher public sector spending including highway and bridge spending. The passage of the Federal Highway Bill in December, which is expected to boost public sector spending, will benefit Cemex. The company’s shares have gained about 28% year-to-date. The company has an expected EPS growth rate of 4% over the next 3 – 5 years. Earnings estimate for the current fiscal year has increased 50.00% over the past 60 days.
Last quarter, this Zacks Rank #2 (Buy) company posted a massive positive surprise of 142.86%. The cement company has posted three positive earnings surprises in the past four quarters, with an average positive surprise of 164.88%.
TopBuild Corp ( BLD - Free Report) Headquartered in Daytona Beach, FL, TopBuild was formed after Masco Corporation ( MAS - Free Report) spun-off its Installation and Other Services segment in June last year. This was a sound strategic move as TopBuild has gained 27% year-to-date. Its earnings estimate for the current fiscal year has gone up 3.06% over the past 60 days.
Last quarter, this Zacks Rank #1 (Strong Buy) company delivered a robust positive earnings surprise of 106.67%. The company has posted three positive earnings surprises in the past four quarters with an average of 24.85%.
Potlatch Corporation ( PCH - Free Report) Potlatch Corporation is a forest products company. The company’s shares have gained over 26% year-to-date. The company has an expected EPS growth rate of 5% over the next 3 – 5 years. Its earnings estimate for the current fiscal year increased 2.00% over the past 60 days.
Last quarter, this Zacks Rank #2 company delivered a robust positive earnings surprise of 100.00%. The company has posted two positive earnings surprises in the past four quarters with an average positive surprise of 50.00%.
Louisiana-Pacific Corporation ( LPX - Free Report) Building products company, Louisiana-Pacific’s shares have gained about 7% year-to-date. The company’s EPS is likely to increase 5% over a span of 3 – 5 years. Its earnings estimate for the current fiscal year increased 13.79% over the past 60 days.
Last quarter, this Zacks Rank #1 company delivered a robust positive earnings surprise of 250.00%. The company beat estimates in three out of the past four quarters with an average positive surprise of 55.00%.
Conclusion With the rise in demand for homes and improving job market in 2016, construction companies such as the ones discussed above are expected to witness strong demand for their products. Despite the obvious headwinds, there is a strong possibility that these companies will continue to perform well in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>