The U.S. construction sector is expected to have delivered mixed third-quarter 2026 results, supported by robust investments in artificial intelligence (AI)-driven data centers, power infrastructure and public construction projects. However, persistent housing affordability challenges, elevated construction costs and labor shortages likely weighed on profitability.

Construction activity remained uneven during the quarter. Per Dodge Construction Network, total construction starts increased 14.3% year over year in the first nine months of 2026, driven by a 23.7% increase in nonresidential starts and an 18.4% rise in nonbuilding construction. Conversely, residential starts declined 1.7%, highlighting the divergence between infrastructure-led growth and housing-related weakness.

Against this backdrop, third-quarter earnings across the construction sector are likely to reflect differences in end-market exposure, project execution, backlog conversion, pricing power and cost-management capabilities. With the help of the Zacks Stock Screener, some of the companies under the broader Zacks Construction sector, Innodata Inc. (INOD Quick QuoteINOD - Free Report) , Argan, Inc. (AGX Quick QuoteAGX - Free Report) , Trex Company, Inc. (TREX Quick QuoteTREX - Free Report) , Quanta Services, Inc. (PWR Quick QuotePWR - Free Report) , and Sterling Infrastructure, Inc. (STRL Quick QuoteSTRL - Free Report) , are poised to beat on earnings this reporting cycle.

Per the latest Earnings Trends report, about 15.4% of companies on the S&P 500 Index have reported in the third-quarter earnings season so far. Of these, the Construction sector's total earnings declined 43% year over year, while revenues fell 8.7%. None of the companies beat earnings per share (EPS) estimates and revenue expectations.

AI and Infrastructure Investments Likely Drove Growth

Accelerating investments in AI-driven data centers, hyperscale facilities and cloud infrastructure are expected to have supported U.S. construction activity during the third quarter of 2026. Growing demand for electrical installations, HVAC systems, modular construction and specialized engineering services likely strengthened revenues and project backlogs. Rising electricity consumption, grid modernization and power generation investments also likely boosted demand for transmission and distribution infrastructure. 

Meanwhile, federal and state infrastructure funding is expected to have sustained highway, bridge, airport and water infrastructure projects. Investments in advanced manufacturing, semiconductor facilities and institutional construction likely provided additional support. These trends may have boosted demand for building materials, equipment utilization and rental activity, although project delays and permitting challenges remained concerns.

Housing Weakness and Soft Commercial Demand Hurt Growth

The residential construction market likely remained under pressure amid elevated mortgage rates, affordability constraints and cautious homebuyer sentiment. Higher home prices and financing costs likely dampened demand, prompting builders to offer pricing discounts and mortgage-rate incentives, potentially squeezing margins. According to the U.S. Census Bureau, September housing starts declined 7.4% year over year, reflecting continued market weakness. Commercial construction likely experienced mixed conditions, with traditional office and retail developments facing softer demand despite healthy investments in specialized industrial and technology-related projects. Building materials, roofing and remodeling activity likely reflected this divergence, with infrastructure-related demand offsetting some residential weakness. Elevated borrowing costs and discretionary spending constraints may have further limited construction activity across certain markets.

Rising Costs and Labor Shortages Likely Pressured Margins

Persistent skilled labor shortages, rising wages, material inflation and supply-chain disruptions are expected to have pressured construction profitability during the quarter. Higher costs for steel, copper, electrical components, fuel and transportation, alongside tariff-related uncertainties, likely increased project expenses. Competition for specialized workers and extended equipment lead times may have further complicated execution schedules. However, favorable pricing, disciplined procurement, modular construction and operational efficiencies likely helped mitigate these pressures. Strong project backlogs and strategic acquisitions may have supported revenue growth, although integration expenses and working-capital requirements remained challenges.

Overall, earnings likely reflected stronger performance in infrastructure-oriented businesses than in residential construction, with backlog conversion, margin trends and cash generation remaining key indicators of sector health.

Q3 Expectations

Per the latest Earnings Trends report, construction sector earnings are expected to grow 3.4% for the third quarter from a year ago. This indicates a decrease from the second quarter of 2026’s 5.8% growth. Revenues are projected to grow 8.6%, nearly the same as 8.7% growth in the preceding quarter.

The Zacks Methodology

Picking the right stock could be difficult unless one knows the proper method. To make the task simple, we rely on the Zacks methodology, combining a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) and a positive Earnings ESP.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of the Zacks Rank and ESP, chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Winning Stocks

For investors willing to adopt this strategy, we have highlighted five construction stocks that may stand out this earnings season.

Innodata— a global data engineering and AI systems services firm — topped earnings estimates in all the trailing four quarters, with the average surprise being 102.2%.

INOD is likely to beat expectations when it reports third-quarter 2026 results on Nov. 5, 2026, after the closing bell. This Zacks Rank #3 company has an Earnings ESP of +22.53%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for INOD’s third-quarter EPS is pegged at 24 cents, same as the year-ago reported figure.

Strong demand for AI data engineering, reusable datasets and high-value pre-training services is expected to have supported Innodata’s quarterly performance. Expanding opportunities in agentic AI, model evaluation and physical AI are also likely to have contributed to revenue growth.
 

Innodata Inc Price and EPS Surprise

Innodata Inc price-eps-surprise | Innodata Inc Quote

Argan — an engineering and construction firm operating through wholly owned subsidiaries across power generation, industrial construction and teledata infrastructure — topped earnings estimates in all the trailing four quarters, with the average surprise being 44.2%.

AGX is likely to beat expectations when it reports third-quarter fiscal 2027 results. This Zacks Rank #3 company has an Earnings ESP of +4.79%.

The Zacks Consensus Estimate for AGX’s fiscal third-quarter EPS is pegged at $3.34, representing growth of 53.9% from the year-ago reported figure on a 46.5% revenue growth.

Rising demand for power infrastructure, fueled by data center expansion, AI investments and electrification trends, is expected to have supported Argan’s quarterly results. Its substantial backlog, healthy project pipeline and expanding industrial fabrication capabilities are likely to have aided performance. However, declining backlog levels, uncertainty surrounding new project awards and margin pressures in the Industrial segment may have weighed on results.

Argan, Inc. Price and EPS Surprise

Argan, Inc. price-eps-surprise | Argan, Inc. Quote

Trex— manufactures and sells composite decking and railing products in the United States — topped earnings estimates in two of the trailing four quarters and missed on the other two, with the average being 125.9%.

TREX is likely to beat expectations when it reports third-quarter 2026 results on Nov. 4, 2026, before market open. This Zacks Rank #2 company has an Earnings ESP of +4.57%.

The Zacks Consensus Estimate for TREX’s third-quarter EPS is pegged at 49 cents, representing a decline of 3.9% from a year ago.

Growing demand for composite decking, increasing wood-to-composite conversion, expanding retail distribution and improving operational efficiencies are expected to have supported Trex’s quarterly performance. However, an unfavorable product mix, higher depreciation expenses, manufacturing inefficiencies and continued softness in the repair and remodeling market are likely to have pressured profitability.

Trex Company, Inc. Price and EPS Surprise

Trex Company, Inc. price-eps-surprise | Trex Company, Inc. Quote

Quanta — a leading provider of specialty contracting and infrastructure solutions — topped earnings estimates in all the trailing four quarters, with the average surprise being 17%.

PWR is likely to beat expectations when it reports third-quarter 2026 results on Oct. 29, 2026, before market open. This Zacks Rank #3 company has an Earnings ESP of +2.66%.

The Zacks Consensus Estimate for PWR’s third-quarter EPS is pegged at $5.01, representing growth of 50.5% from a year ago on 44% higher revenues.

Rising electricity demand, driven by data center expansion, electrification and grid modernization, is expected to have boosted Quanta’s quarterly performance. Strong investments in power generation and mission-critical infrastructure, supported by record backlog and remaining performance obligations, are likely to have aided revenue growth. Contributions from recent acquisitions, which expanded its electrical, mechanical, fabrication and front-end capabilities, are also expected to have supported results.

Quanta Services, Inc. Price and EPS Surprise

Quanta Services, Inc. price-eps-surprise | Quanta Services, Inc. Quote

Sterling — a diversified U.S. infrastructure services company — topped earnings estimates in all the trailing four quarters, with the average surprise being 27.2%.

STRL is likely to beat expectations when it reports third-quarter 2026 results on Oct. 28, 2026, after market close. This Zacks Rank #2 company has an Earnings ESP of +0.80%.

The Zacks Consensus Estimate for STRL’s third-quarter EPS is pegged at $6.07, representing growth of 74.4% from a year ago on 69.6% higher revenues.

Accelerating investments in data centers, semiconductor facilities and advanced manufacturing projects are expected to have supported Sterling’s quarterly performance. Its growing higher-margin backlog, integrated site development and electrical services capabilities, and improving project productivity are likely to have boosted revenues and profitability. Additionally, contributions from the Stone Ridge acquisition, which expanded E-Infrastructure capabilities across the Pacific Northwest and Texas, are expected to have aided growth.

Sterling Infrastructure, Inc. Price and EPS Surprise

Sterling Infrastructure, Inc. price-eps-surprise | Sterling Infrastructure, Inc. Quote