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Construction Stocks Q1 Earnings on May 8: MLM, SUM & More

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Robust gains from home building investments, strong economic growth and recent tax reforms are working in favor of the construction sector. Moreover, modest wage growth, low unemployment and positive consumer confidence are positives. Also, President Trump’s promise to double economic growth through a stimulus program that includes tax cuts, deregulation and higher infrastructure spending are likely to keep the sector on a growth trajectory.

Notably, per the latest U.S. Census Bureau report, construction spending in March dropped 1.7% from the previous month. However, for the first three months of 2018, the metric increased 5.5% from the year-ago period.

Importantly, political and economic uncertainties continue to affect the sector. One such obstacle is the recent imposition of tariffs on imported steel and aluminum. An increase in import tariff will escalate raw material cost for builders, which are grappling with increased cost, thanks to the imposition of lumber tariff. This along with high cost of land and labor as well as mortgage rate hikes raises concern.

The implications of the metal tariffs and mortgage hike are yet to be felt in the sector that has occupied the third position out of 16 sectors based on the Zacks classification. Notably, a sector with a larger percentage of Zacks Rank #1 (Strong Buy) and 2 (Buy) stocks will have a better average than the rest.

Q1 Earnings

The first-quarter earnings season is well past the halfway mark, with earnings and revenue growth set to reach highest level in the last seven years. So far, the earnings season has seen releases from 409 S&P 500 members, with 78% beating EPS estimates and 75.6% beating revenue estimates.

According to the latest Earnings Preview, total earnings in first-quarter 2018 are expected to be up 23.2% from the prior-year quarter on 8.7% higher revenues compared with 13.4% earnings growth in the fourth quarter of 2017 on 8.6% rise in revenues.

The construction sector’s earnings are expected to increase 47.2% compared with 20.6% in the prior quarter. Revenues are also expected to improve 18.8% (13.3% growth in fourth-quarter 2017).

Now let us take a look at how the following construction companies are placed ahead of their quarterly release on May 8.

Our research shows that when a Zacks Rank #1, 2 or 3 (Hold) stock has a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Martin Marietta Materials, Inc. MLM is scheduled to report results, before the market opens. The company beat the Zacks Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 7.7%. In the last reported quarter, the company came up with a positive earnings surprise of 32.4%.

Adverse weather conditions in many markets are likely to mar Martin Marietta’s results in the to-be-reported quarter. Weather-related risks have been affecting the company’s performance, thanks to the exterior nature of the business, in spite of improving economic conditions, cost management and enhanced operational efficiency.  The first and fourth quarters are most affected by winter. Hurricanes in the Atlantic Ocean and Gulf Coast are prevalent during these periods.

Nevertheless, string of acquisitions, divestitures and an uptick in private construction activity are expected to provide some cushion to revenues and earnings. (read more: Inclement Weather to Hurt Martin Marietta's Q1 Earnings?)

Overall, for the first quarter, the Zacks Consensus Estimate is currently pegged at 41 cents, reflecting year-over-year decline of 38.8%. Analysts polled by Zacks expect revenues of $805.1 million, indicating a rise of 1.7% from the year-ago quarter’s tally.

Our proven model does not show that Martin Marietta is likely to beat earnings this quarter as it has an Earnings ESP of -24.80% and a Zacks Rank #3.



Martin Marietta Materials, Inc. Price and EPS Surprise

 

Martin Marietta Materials, Inc. Price and EPS Surprise | Martin Marietta Materials, Inc. Quote

 

Summit Materials, Inc. SUM is scheduled to report results, before the market opens. The company surpassed the Zacks Consensus Estimate in one of the trailing four quarters, with an average positive surprise of 19.2%. In the last reported quarter,  the company delivered a positive earnings surprise of 109.1%.

The Zacks Consensus Estimate is pegged at a loss of 56 cents, reflecting year-over-year decline of 14.3%. Analysts polled by Zacks expect revenues of $317.7 million, indicating a rise of 11.8% from the year-ago quarter.

Our proven model does not show that Summit Materials is likely to beat earnings this quarter as it has an Earnings ESP of -3.42% and a Zacks Rank #3.

 

Summit Materials, Inc. Price and EPS Surprise

 

Summit Materials, Inc. Price and EPS Surprise | Summit Materials, Inc. Quote

 

JELD-WEN Holding, Inc. JELD is scheduled to report results, before the market opens. The company surpassed the Zacks Consensus Estimate in one of the trailing four quarters, with an average negative surprise of 39.6%. In the last quarter, the company came up with a negative earnings surprise of 36.6%.

Overall, for the first quarter, the Zacks Consensus Estimate is pegged at 23 cents, reflecting year-over-year increase of 560%. The consensus estimate for revenues is projected at $914.1 million, indicating a rise of 7.8% from the year-ago quarter’s figure.

Our proven model does not show that JELD-WEN is likely to beat earnings this quarter as it has an Earnings ESP of -5.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

JELD-WEN Holding, Inc. Price and EPS Surprise

 

JELD-WEN Holding, Inc. Price and EPS Surprise | JELD-WEN Holding, Inc. Quote

 

TopBuild Corp. BLD is scheduled to report results, before the market opens. The company surpassed the Zacks Consensus Estimate in all of the trailing four quarters, with an average surprise of 10.37%. In the last reported quarter, the company came up with a positive earnings surprise of 3.7%.

For the first quarter, the Zacks Consensus Estimate is pegged at 67 cents, reflecting year-over-year increase of 45.7%. The consensus estimate for revenues is $486.4 million, indicating a rise of 10.2% from the year-ago quarter.

Our proven model does not show that TopBuild is likely to beat earnings this quarter as it has an Earnings ESP of -3.37% and a Zacks Rank #3.

 

TopBuild Corp. Price and EPS Surprise

 

TopBuild Corp. Price and EPS Surprise | TopBuild Corp. Quote

 

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