The construction sector appears to be on solid ground given strong demand, aided by favorable household formation trends and a strengthening macro backdrop. Elevated construction spending in the United States, an impressive labor market scenario, moderate inflation and Trump’s impetus to boost infrastructure spending seem to be vital growth catalysts for the companies under the sector.
Indeed, limited land availability, higher land/labor and material costs, as well as a constrained mortgage environment are restricting the construction stocks from responding to the growing demand. Then again, higher demand, booming economy along with solid job market will keep the momentum alive.
According to the latest Earnings Preview, the construction sector’s earnings, within the S&P 500 cohort, are expected to increase 53.6% in the second quarter compared with 49.7% in the last reported quarter. Revenues are also expected to improve 23.8% (versus 20.9% growth in Q1).
So far, a number of leading companies in the construction sector have reported second-quarter results. KBR, Inc. (KBR - Free Report) reported adjusted earnings of 34 cents per share in second-quarter 2018, beating the Zacks Consensus Estimate of 33 cents by 3%. Also, the company’s revenues of $1,267 million surpassed the consensus mark of $1,189 million.
Let’s have a sneak peek at the three major construction stocks that are scheduled to report second-quarter earnings on Aug 2 and find out how things are shaping up before the announcement.
Our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Fluor Corporation (FLR - Free Report) is scheduled to report quarterly results after the closing bell.
In the last reported quarter, the company’s earnings came in at 56 cents per share, missing the Zacks Consensus Estimate of 81 cents by 30.86%. However, the company surpassed estimates in three of the past four quarters, resulting in an average positive surprise of 4.45%.
Our proven model hints at an earnings beat for the company in the to-be-reported quarter, as Fluor has an Earnings ESP of +1.45% and Zacks Rank #3.
The company has been reporting dismal results for Mining, Industrial, Infrastructure & Power, and Energy & Chemicals businesses. That said, its market diversity as well as strong focus on streamlining the business structure to boost profitability are expected to boost growth. Also, stabilizing commodity prices and gradual improvement in the energy and mining sectors are anticipated to unlock further growth opportunities.
Fluor has been enhancing its competitive position in the market through prudent leadership initiatives and strategic alliances. Notably, starting from first-quarter 2018, the company shifted the mining business to its industrial, infrastructure and power segment to better align external reporting with its operations.
Fluor’s revenues from the Energy & Chemicals segment, accounting for 40.3% of the total revenues, are expected to improve sequentially, benefiting from chemical derivative and refining opportunities, both domestic and international, along with upstream and LNG opportunities. The Zacks Consensus Estimate for Energy & Chemicals revenues of $2,057 million reflects growth from $1,943 million in the first quarter.
Meanwhile, the Mining, Industrial, Infrastructure & Power segment, accounting for 18.9% of the company’s total revenues, has been reporting dismal results. However, given the opportunities in copper, gold and iron ore replacement projects, the company remains optimistic of the segment’s performance going forward. The Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $1,019 million, reflecting growth from $910 million in the last reported quarter.
Robust pipeline of work in North America and Europe is expected to be favorable for the company’s Diversified Services business. Further, the company has grown its maintenance, fabrication and construction capabilities, as well as invested in systems and processes that are expected to improve project delivery. The segment’s revenues are expected to record a modest improvement to $648 million from $643 million in the first quarter.
Meanwhile, the Government segment (contributing 27.5% to the total revenues) has been performing pretty well. Fluor enjoys a solid track record of contracts, and management remains optimistic that the trend will continue in the to-be-reported quarter and even in the future, thereby driving growth of the company.
Overall, for the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $4.51 billion, implying a 4.4% decline. The Zacks Consensus Estimate for earnings is pegged at 69 cents, reflecting a 4.2% year-over-year decrease.
Quanta Services, Inc. (PWR - Free Report) is slated to release quarterly results before the opening bell.
In the last reported quarter, the company’s earnings came in at 40 cents per share, beating the Zacks Consensus Estimate of 32 cents by 25%. In fact, the company surpassed estimates in three of the past four quarters, resulting in an average positive surprise of 6.66%.
We cannot conclusively predict an earnings beat for the company in the quarter to be reported, as it has an Earnings ESP of -2.19% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Overall, for the second quarter, the Zacks Consensus Estimate for earnings is pegged at 61 cents, reflecting a 22% year-over-year increase. The consensus estimate for revenues is pegged at $2.55 billion, implying a 15.8% increase. (Read More: Quanta Services Q2 Earnings: What’s in the Cards?)
MasTec, Inc. (MTZ - Free Report) is slated to release quarterly results after the market closes.
The company delivered a positive surprise of 59.09% in the last reported quarter. Also, the company surpassed estimates in all of the past four quarters, resulting in an average positive surprise of 38.25%.
We cannot conclusively predict an earnings beat for the company in the second quarter, as it has an Earnings ESP of 0.00% and a Zacks Rank #3.
Overall, for the second quarter, the Zacks Consensus Estimate for earnings is pegged at $1.03, in line with the year-ago figure. The consensus estimate for revenues is pegged at $1.79 billion, implying a 5.1% decrease.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>