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Construction Stock Q1 Earnings Due on Apr 27: AWI, SSD, PCH

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The Zacks Construction sector is expected to have performed pretty well in first-quarter 2020 despite the coronavirus pandemic. Notably, the first two months of the quarter are expected to have delivered solid performance backed by robust housing market dynamics and increased public sector construction activity. The dampening effects of COVID-19 were only felt in the latter part of the quarter, precisely March.

A number of project awards across multiple business segments — including large transportation and highway projects, communications, transmission and power, and infrastructural projects in domestic as well as international markets — and strong pricing are likely to have contributed to growth in the quarter.

In the residential construction space, lower mortgage rates, reduced construction costs, low unemployment and rising wages are expected to have somewhat offset headwinds like rising land and labor costs, shortage of home supplies, well as as the coronavirus-induced outbreak. Record low inventory level continues to be a potent headwind that has been deterring prospective buyers, especially first-timers.

However, widespread slowdown in economic activity owing to the coronavirus outbreak began to adversely affect companies' business operations and demand for homes in the latter part of March, stretching into April. Due to weakening business conditions, order cancellation rate in March was intensified.

Notable Releases So Far

Some notable construction companies like Lennar (LEN - Free Report) , KB Home (KBH - Free Report) and Fastenal (FAST - Free Report) recently released their quarterly numbers. Fastenal’s first-quarter 2020 revenues and earnings topped the respective Zacks Consensus Estimate despite persistant decline in activity levels. The company stated that the activity levels weakened significantly in the second half of March, in response to societal actions that were undertaken to address the coronavirus pandemic.

Lennar’s first-quarter fiscal 2020 earnings also topped analysts’ expectation, marking the fourth consecutive quarter of an earnings beat. KB Home also came out with impressive first-quarter fiscal 2020 results, wherein earnings and revenues topped the respective Zacks Consensus Estimate, and registered notable improvement on a year-over-year basis.

Overall Prediction

Per the latest Earnings Outlook, construction sector earnings are expected to grow 15.4% in first-quarter 2020 compared with 9.6% growth in fourth-quarter 2019. Revenues are projected to increase 12.4% versus 3.1% growth in the prior quarter.

A Few Construction Stocks to Watch

Let’s take a quick glance at how the following construction stocks are poised ahead of their first-quarter earnings releases on Apr 27.

Our research shows that companies with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have higher chances of beating earnings estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Armstrong World Industries, Inc. (AWI - Free Report) is slated to report quarterly results before the opening bell. In the last reported quarter, the company’s top line missed the Zacks Consensus Estimate by 3.5% but earnings beat the same by 30.6%. In fact, Armstrong World surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average positive earnings surprise being 15.04%, as shown in the chart below:

Our proven model does not conclusively predict an earnings beat for Armstrong World this time around, as it has an Earnings ESP of 0.00% and a Zacks Rank #3.

The Zacks Consensus Estimate for the company’s first-quarter earnings is pegged at $1.14 per share, implying growth of 3.6% on a year-over-year basis. The consensus estimate for revenues is $255.7 million, indicating a 5.6% year-over-year improvement.

Simpson Manufacturing Co., Inc. (SSD - Free Report) is slated to report quarterly results after the closing bell. In the last reported quarter, the company’s earnings beat the consensus mark by 3.3% but revenues missed the same by 4%. Simpson Manufacturing’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with the average negative surprise being 0.05%, as shown in the chart below:

Simpson Manufacturing Company, Inc. Price and EPS Surprise

Simpson Manufacturing Company, Inc. Price and EPS Surprise

Simpson Manufacturing Company, Inc. price-eps-surprise | Simpson Manufacturing Company, Inc. Quote

The chances of Simpson Manufacturing to delivering an earnings beat are low this time around as it has a Zacks Rank #4 (Sell) despite an Earnings ESP of +0.73%.

The Zacks Consensus Estimate for Simpson Manufacturing’s first-quarter earnings is pegged at 69 cents per share, implying growth of 38% on a year-over-year basis. The consensus estimate for revenues is $285 million, indicating a 10% year-over-year increase.

PotlatchDeltic Corporation (PCH - Free Report) is slated to report quarterly results after the closing bell. In the last reported quarter, the company’s earnings beat the consensus mark by a whopping 70% but revenues missed the same by 5.7%. In fact, PotlatchDeltic surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average positive earnings surprise being 53.2%, as shown in the chart below:

Potlatch Corporation Price and EPS Surprise

Potlatch Corporation Price and EPS Surprise

Potlatch Corporation price-eps-surprise | Potlatch Corporation Quote

Similar to Simpson Manufacturing, the chances of PotlatchDeltic delivering an earnings beat in the first quarter are low, as it has an Earnings ESP of -17.50% and a Zacks Rank #3.

The Zacks Consensus Estimate for PotlatchDeltic’s first-quarter earnings is pegged at 13 cents per share, implying growth of 62.5% on a year-over-year basis. The consensus estimate for revenues is $193.5 million, indicating a 6.5% year-over-year increase.

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