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Construction Stock Q3 Earnings Due on Nov 12: DHI, ACM, CBPX

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The Zacks Construction sector has performed pretty well so far this earnings season, backed by rebounding housing market dynamics.

Some notable construction companies like Masco Corporation (MAS - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Vulcan Materials Company (VMC - Free Report) recently released their third-quarter 2019 numbers. Another handful of companies from the same space are likely to release their respective quarterly numbers by the end of this week.

Notably, the industry players are expected to have gained from growth in public sector construction activity (primarily in large transportation projects and contract work for highways), solid execution of projects awarded over the last few quarters, as well as strong pricing activities.

Additionally, solid household formation attributable to declining mortgage/interest rates, steady economic growth, favorable demographics, a modest rise in home prices and solid job market are likely to have supported growth.

Moreover, increasing defense spending in major economies like the United States, elevated public investment in worldwide transportation, water infrastructure and utility plant, as well as business prospects in the healthcare market might have added to the positives in the quarter to be reported.

Per the latest Earnings Preview, the sector’s earnings are expected to grow 5.1% in the third quarter against a 5.4% drop in the second quarter. Revenues are projected to increase 1.9% (versus flat growth in the second quarter).

However, rising freight expenses, higher incentives to drive sales and land/labor costs might have weighed on margins of many companies in the construction space.

A Few Construction Stocks to Watch

Let’s take a quick glance at how the following construction stocks are poised ahead of their earnings releases on Nov 12.

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

D.R. Horton, Inc.’s (DHI - Free Report) earnings and revenues in the last reported quarter surpassed the Zacks Consensus Estimate by 18.9% and 8.2%, respectively. The company reported better-than-expected results in two of the last four quarters, with the average positive earnings surprise being 5.91%, as shown in the chart below:

D.R. Horton, Inc. Price and EPS Surprise

However, our proven model does not conclusively predict an earnings beat for the company in the third quarter as it has an Earnings ESP of 0.00% and a Zacks Rank #2.

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at $1.25 per share, remaining stable over the past 60 days. This indicates a 2.5% increase from the year-ago earnings of $1.22 per share. The consensus mark for revenues is $4.84 billion, suggesting an increase of 7.8% year over year (read more: D.R. Horton to Post Q4 Earnings: What's in the Cards?).

D.R. Horton’s industry-leading market share, solid inorganic moves and affordable product offerings across multiple brands are likely to have strongly contributed to revenue growth. In fact, the company is expected to deliver an improved performance in the to-be-reported quarter, given improving housing market fundamentals, declining mortgage rates and a solid job market.

AECOM (ACM - Free Report) reported mixed results in the last reported quarter, wherein earnings topped the Zacks Consensus Estimate by 1.4% but revenues missed the same by 3.7%. The company’s earnings topped analysts’ expectations in the last four quarters, with the average surprise being 6.17%, as shown in the chart below:

AECOM Price and EPS Surprise

It has an Earnings ESP of -1.24% and a Zacks Rank #2.

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at 81 cents per share, remaining unchanged over the past 60 days. That said, the estimated figure implies a 2.4% year-over-year decline. The consensus estimate for revenues is $5.2 billion, pointing to 1.9% year-over-year fall.

Robust prospects across the business, $225-million General and Administrative (G&A) reduction plan, along with the U.S. government’s $1.5-trillion infrastructural plan are expected to have benefited the company in third-quarter fiscal 2019.

However, AECOM has been facing certain challenges in a few of its end markets. This might have weighed on its financial performance. Economic conditions in many of its end-markets served, including China and the Middle East, have weakened over time, which might have proved to be a drag on revenues.

Continental Building Products, Inc.’s (CBPX - Free Report) second-quarter earnings and revenues missed the Zacks Consensus Estimate by 8.5% and 5.2%, respectively. Nonetheless, its earnings surpassed the consensus estimate in two of the last four quarters, with the average positive surprise being 5.1%, as shown in the chart below:

Continental Building Products, Inc. Price and EPS Surprise

It has an Earnings ESP of +3.95% and a Zacks Rank #3.

For the quarter to be reported, the Zacks Consensus Estimate has been upwardly revised over the past 30 days to 38 cents. The estimated figure indicates a 24% decrease from the year-ago earnings of 50 cents per share. The Zacks Consensus Estimate for revenues is pegged at $126.32 million, suggesting 3.8% year-over-year growth.

The company is expected to have benefited from its focus on the strategy of lean manufacturing and continuous improvement, named as Bison Way. The strategy mainly focuses on safety, customer experience and operational excellence that allow it to run its business efficiently in choppy market environments.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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