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Factors Likely to Shape Forterra (FRTA) This Earnings Season

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Forterra, Inc. is scheduled to report first-quarter 2020 results on Apr 29, after market close.

In the last reported quarter, the company’s bottom line met the Zacks Consensus Estimate but net sales beat the same. This leading manufacturer of water and drainage infrastructure pipe and products in the United States and Eastern Canada reported net loss of 12 cents per share, narrower than the year-ago loss of 27 cents.

The company’s net sales grew 7.1% from the year-ago period, courtesy of its solid performance in both the segments — Drainage Pipe & Products and Water Pipe & Products.

Markedly, Forterra reported better-than-expected earnings in all the last four quarters, with the average surprise being 75.9%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s loss has been unchanged at 22 cents per share over the past 30 days. This indicates an improvement from the year-ago loss of 39 cents per share. The consensus mark for revenues is $311 million, suggesting a 6.6% year-over-year improvement.

FORTERRA INC Price and EPS Surprise

FORTERRA INC Price and EPS Surprise

FORTERRA INC price-eps-surprise | FORTERRA INC Quote

Factors to Note

The company’s revenues are expected to have improved owing to higher contributions from both the segments. Higher shipment volumes and average selling prices are expected to have benefited both Drainage and Water segments.

However, disruption caused by the coronavirus outbreak is expected to have weighed on its performance in the latter part of March, stretching into April. That said, Forterra has been largely spared from the ongoing containment measures undertaken by the government. Both federal and state governments have classified construction as an “essential” industry. The Department of Homeland Security and CISA “Guidance on the Essential Critical Infrastructure Workforce” have categorized water and wastewater systems, and the transportation projects sector as “Essential” to the nation. Baring one plant in Pennsylvania, the company’s manufacturing facilities across the United States and eastern Canada remain operational during the pandemic. Likewise, its Water segment’s distributors remain open for business, per management.

Lower cost of crude oil is expected to have contributed to the bottom line, which might have offset the disruptions caused by the pandemic. Apparently, key material costs of iron and scrap steel have dropped, as the oil industry has reduced the purchase of such materials since the collapse of crude oil prices. Notably, the oil industry is the largest buyer of scrap steel. Furthermore, lower diesel is likely to have reduced transportation costs in the quarter. This is expected to have affected its margins.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Forterra this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: Forterra has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are some stocks in the construction sector that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases.

D.R. Horton, Inc. (DHI - Free Report) has an Earnings ESP of +1.34% and a Zacks Rank #3.

Rayonier Inc. (RYN - Free Report) has an Earnings ESP of +5.00% and holds a Zacks Rank #3.

Frontdoor, Inc. (FTDR - Free Report) has an Earnings ESP of +9.76% and holds a Zacks Rank #3.

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