Construction Stocks to Post Q4 Earnings on Feb 1: PHM, MDC & LII
The Zacks Construction sector is likely to have performed impressively in fourth-quarter 2021. Solid housing market dynamics, gradually improving infrastructural and public construction spending, bolt-on acquisitions as well as operational efficiencies might have aided the sector's quarterly performance.
Meanwhile, a number of project awards across multiple business segments — including sustainable technology, security, transmission and power — as well as other infrastructural projects in domestic and international markets are likely to have contributed significantly to the companies’ performance. Again, increasing defense spending in major economies like the United States, rising public investments in water, environment, space, broadband, cybersecurity and life sciences and utility plants are expected to have acted as tailwinds.
Yet, a volatile lumber market, disrupted supply chain, raw materials, transportation and labor pushed average home prices higher.
Although market conditions are improving as more people are looking for separate, bigger and sustainable space, these headwinds might have put pressure on the companies’ bottom-line performance.
Per the latest Earnings Outlook, construction sector earnings are expected to grow 20.2% year over year for the fourth quarter, indicating 80 basis points (bps) fall from 21% growth registered in third-quarter 2021. Revenues are projected to increase 14.9% year over year, suggesting an improvement from 14.1% growth in the last reported quarter.
A Look at Recent Earnings Release
Some notable construction companies like United Rentals, Inc. URI, Meritage Homes Corporation MTH and Weyerhaeuser Company WY recently reported impressive fourth-quarter 2021 numbers.
United Rentals posted better-than-expected fourth-quarter 2021 results. Better fleet absorption, higher revenues and stronger pricing helped the company end 2021 on a stronger note.
Meritage Homes came up with solid fourth-quarter 2021 results. Earnings surpassed the Zacks Consensus Estimate and improved significantly on a year-over-year basis. Revenues also improved from the year-ago period on the back of a strong housing market.
Weyerhaeuser reported fourth-quarter 2021 results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate despite persistent supply-chain challenges and the ongoing pandemic.
A handful of companies from the construction space are likely to release their respective quarterly numbers on Feb 1.
Sneak Peek Into Upcoming Earnings Releases
Let’s take a quick glance at how the following construction stocks are poised ahead of their fourth-quarter earnings releases on Feb 1.
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.
PulteGroup, Inc. PHM is slated to report quarterly results before the opening bell. Third-quarter 2021 earnings and revenues missed the Zacks Consensus Estimate by 0.5% and 1.1%, respectively. Nonetheless, the metrics improved 36% and 17.7%, respectively, year over year on solid demand trends and higher pricing. In the trailing six quarters, its earnings lagged the consensus estimate once, beat the same on four occasions and met on the other, as shown in the chart below:
PulteGroup, Inc. Price and EPS Surprise
PulteGroup, Inc. price-eps-surprise | PulteGroup, Inc. Quote
Our proven model predicts an earnings beat for the company this time around as it has an Earnings ESP of +1.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to $2.29 per share from $2.33 over the past 30 days. Nonetheless, the estimated figure indicates a 53.7% increase from the year-ago earnings of $1.49 per share. Also, the consensus mark for revenues is $4.16 billion, suggesting 30.4% year-over-year growth.
Although input cost inflation and high costs associated with labor and transportation are expected to have weighed on fourth-quarter margins to some extent, this prime homebuilder has been banking on solid demand trends and focus on entry-level homes. (Read more: Is a Beat in the Cards for PulteGroup's Q4 Earnings?)
M.D.C. Holdings, Inc. MDC is slated to report quarterly results before the opening bell. In the last reported quarter, the company’s top and bottom lines lagged the Zacks Consensus Estimate by 6.9% and 4.3% but improved 25.4% and 44.2% year over year, respectively. Its earnings lagged the consensus estimate in just one of the trailing six quarters and beat the same on the other occasions, as shown in the chart below:
M.D.C. Holdings, Inc. Price and EPS Surprise
M.D.C. Holdings, Inc. price-eps-surprise | M.D.C. Holdings, Inc. Quote
The chances of MDC delivering an earnings beat are low this time around as it has an Earnings ESP of 0.00% and a Zacks Rank #3.
The Zacks Consensus Estimate for MDC’s fourth-quarter earnings is pegged at $2.52 per share, implying growth of 24.1% from the year-ago reported figure. The consensus estimate for revenues stands at $1.56 billion, indicating a 27.6% increase from the prior-year reported number. This leading homebuilder has been benefiting from the build-to-order process, accretive land acquisitions and efforts to provide affordable homes. Yet, supply chain issues and other industry woes are likely to have put pressure on the bottom line.
Lennox International Inc. LII is slated to report quarterly results before market open. For third-quarter 2021, earnings and revenues of $3.40 per share and $1.06 billion missed estimates by 6.6% and 6.1%, respectively. On a year-over-year basis, revenues grew 0.5% while earnings declined 3.7% due to the negative impact of the global supply chain and COVID-19 disruptions. Its earnings lagged the consensus estimate in just one of the trailing six quarters, as shown in the chart below:
Lennox International, Inc. Price and EPS Surprise
Lennox International, Inc. price-eps-surprise | Lennox International, Inc. Quote
Our proven model does not conclusively predict an earnings beat for LII as it has an Earnings ESP of -0.36% and a Zacks Rank #3.
For the quarter to be reported, the Zacks Consensus Estimate for earnings has declined 2.4% to $2 per share over the past 60 days. The estimated figure indicates a 30.8% deterioration from the year-ago figure of $2.89 per share. The Zacks Consensus Estimate for revenues is pegged at $954.46 million, suggesting 4.4% year-over-year growth.
Despite witnessing strong demand across end-markets served, the company’s profitability is likely to have been hurt by global supply chain bottlenecks and inventory shortages. COVID-19 risks are likely to have added more complexity to labor and production disruptions.
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Weyerhaeuser Company (WY) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Lennox International, Inc. (LII) : Free Stock Analysis Report
Meritage Homes Corporation (MTH) : Free Stock Analysis Report
United Rentals, Inc. (URI) : Free Stock Analysis Report
M.D.C. Holdings, Inc. (MDC) : Free Stock Analysis Report
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