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Construction Stock Q1 Earnings to Watch on May 2: MLM, GVA

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After a string of earnings releases by construction companies, the next batch is gearing up for first-quarter financial reports this week. Overall, earnings are on a growth track this quarter and construction seems to be one of the stand-out sectors.

The ongoing reporting cycle witnessed releases from 61.5% of the construction companies in the S&P 500 cohort as of Apr 28, 2017. Per the latest Earnings Preview, 87.5% companies delivered an earnings beat, while 62.5% surpassed revenue estimates. Total earnings of these construction companies increased 12.5% on 8.3% higher revenues.

Construction activity picked up in 2016. Positives such as an improving economy, modest wage growth, low unemployment levels and positive consumer confidence raise optimism about the sector’s performance in 2017. As such, demand for companies’ products should also increase, thereby driving revenues.

Some leading companies in the construction sector have already reported first-quarter results. Among these, United Rentals Inc. (URI - Free Report) exhibited an impressive performance, with earnings and revenues beating the Zacks Consensus Estimate by 3.2% and 1.5%, respectively.

Masco Corporation’s (MAS - Free Report) reported first-quarter 2017 adjusted earnings of 41 cents per share, beating the consensus mark by 17.1%. Adjusted earnings increased 28.1% year over year. Masco also posted net sales of $1.78 billion, surpassing the Zacks Consensus Estimate of $1.75 billion by 1.7%.

Let’s take a look at how the following two construction companies are placed ahead of their first-quarter 2017 earnings releases on May 2.

Martin Marietta Materials, Inc. (MLM - Free Report) is set to report results before market opens.

Last quarter, the company came up with a negative earnings surprise of 6.63%. In spite of missing estimates in three of the past four quarters, the company has an average positive surprise of 25.85%, owing to a stellar beat in the first quarter of 2016.

Per our model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. In this case, our proven model does not conclusively predict an earnings beat for Martin Marietta Materials as it has a Zacks Rank #3 but an Earnings ESP of -21.21% (Most Accurate estimate stands at 52 cents and Zacks Consensus Estimate at 66 cents). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 66 cents, reflecting a 4.7% year-over-year decrease. Our estimate for revenues is pegged at $724.7 million, pointing at a 1.3% decrease (read more: Martin Marietta Q1 Earnings: Disappointment in Store?).

Granite Construction Incorporated (GVA - Free Report) , a heavy civil general contractor and construction material producer, is slated to report before market opens.

Last quarter, the company disappointed with a negative earnings surprise of 24.53%. The company missed estimates in all the past four quarters, with an average negative surprise of 44.65%.

Our proven model does not conclusively show a beat for Granite which has an Earnings ESP of -48.00% (Most Accurate estimate of 37 cents is higher than the Zacks Consensus Estimate of 25 cents) and a Zacks Rank #5.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The Zacks Consensus Estimate for the quarter’s earnings is pegged at a loss of 25 cents, 10.7% wider year over year. The consensus estimate for revenues is $472.1 million, hinting at 7.4% year-over-year growth.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Granite Construction Incorporated Price and EPS Surprise

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