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Construction Stock Q1 Earnings Due on May 7: OTIS, AAON & More

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The Zacks Construction sector started the earnings season on a strong note, backed by robust housing market dynamics and increased public sector construction activity.

Solid demand through most part of the first quarter in the residential construction space owing to lower interest rates and mortgage loans, reduced construction costs, low unemployment along with improved affordability is expected to have aided the companies’ top lines.

Again, 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 contributed significantly in the quarter. Strong pricing has also been a plus for non-residential industry players.

However, higher land and labor costs, and shortage of home supplies might have offset the positives. Record low inventory level continues to be a headwind that has been deterring prospective buyers, especially first-timers. Furthermore, widespread slowdown in economic activity owing to the coronavirus outbreak began to affect companies' business operations and demand for homes in the latter part of March, stretching into April.

Overall Prediction

Per the latest Earnings Preview, construction sector earnings are expected to grow 24.1% for the first quarter compared with 9.6% growth in fourth-quarter 2019. Revenues are projected to increase 11.3% versus 2.6% growth in the prior quarter.

Notable Recent Releases

Some notable construction companies like D.R. Horton, Inc. (DHI - Free Report) , Masco Corporation (MAS - Free Report) and United Rentals, Inc. (URI - Free Report) recently released their quarterly numbers. D.R. Horton reported mixed results for second-quarter fiscal 2020, wherein earnings topped the Zacks Consensus Estimate but revenues lagged the same. United Rentals reported impressive results for first-quarter 2020. Earnings and revenues topped the Zacks Consensus Estimate and grew on a year-over-year basis. Masco’s first-quarter 2020 earnings and revenues handily beat the Zacks Consensus Estimate and improved year over year.

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 May 7.

Our proven model 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.

Otis Worldwide Corporation ((OTIS - Free Report) is slated to report results before the opening bell. Our proven model does not conclusively predict an earnings beat for Otis this time around, as it has an Earnings ESP of 0.00% and a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s first-quarter earnings is pegged at 47 cents per share. The consensus estimate for revenues is $3.05 billion.

Otis Worldwide Corporation Price

AAON, Inc. (AAON - 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 22.2%. AAON’s earnings surpassed the Zacks Consensus Estimate in only one of the trailing four quarters, the average negative surprise being 4.2%, as shown in the chart below:

AAON, Inc. Price and EPS Surprise

The chances of AAON delivering an earnings beat are low this time around as it has a Zacks Rank #3 and an Earnings ESP of 0.00%.

The Zacks Consensus Estimate for AAON’s first-quarter earnings is pegged at 35 cents per share, implying growth of 66.7% on a year-over-year basis.

Quanta Services, Inc. (PWR - Free Report) is slated to report quarterly results before the opening bell. In the last reported quarter, the company’s top and bottom lines surpassed the Zacks Consensus Estimate by 2.6% and 10.7%, respectively. In fact, Quanta Services surpassed the Zacks Consensus Estimate in three of the trailing four quarters but has an average negative earnings surprise of 7.8%, as shown in the chart below:

Quanta Services, Inc. Price and EPS Surprise

Similar to AAON, the chances of Quanta Services delivering an earnings beat in the first quarter are low, as it has an Earnings ESP of -7.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Quanta Services’ first-quarter earnings is pegged at 47 cents per share, implying a 51% decline on a year-over-year basis. The consensus estimate for revenues is $2.77 billion, indicating a 1.5% year-over-year decline (read more: Quanta Services to Post Q1 Earnings: What Awaits?).

Altair Engineering Inc. (ALTR - Free Report) is slated to report quarterly results after the closing bell. In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 28.6% and 13.2%, respectively. Notably, Altair surpassed estimates in two of the trailing four quarters but has an average negative earnings surprise of 63.2%, as shown in the chart below:

Altair Engineering Inc. Price and EPS Surprise

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

The Zacks Consensus Estimate for Altair’s first-quarter earnings is pegged at 14 cents per share, implying a 46.2% decline on a year-over-year basis. The consensus estimate for revenues is $127.3 million, indicating a 0.4% year-over-year drop.

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