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Construction Stocks' Q2 Earnings Slated for Aug 5: WY, IBP

Zacks Equity Research

The Q2 earnings season (or the quarter ended Jun 30, 2016) is nearing its end and several companies are scheduled to report their financial results this week. As of Jul 29, 2016, 60% of the S&P members already reported their quarterly earnings.

Per the Zacks Earnings Trends report, this will likely be the fifth consecutive quarter to report earnings decline in spite of the sequential improvement in earnings. Interestingly, this quarter is seeing positive revenue growth and is currently outperforming the trend displayed in the preceding quarter. The Q2 earnings season is critical for investors to ascertain the most attractive picks as the market is stabilizing after Brexit, which shook the global economy in Jun 2016. Post Brexit, investors have become jittery and are resorting to safe haven stocks.

In this scenario, investment in the construction sector seems to be a good idea. The second quarter of 2016 has been impressive for the U.S construction sector.

Of the construction companies listed in the S&P 500 index, 53.8% have already reported their results. Almost 57.1% of these companies have surpassed earnings estimates, while 42.9% beat revenue expectations. Total earnings of these construction companies jumped 14.3% on 11.3% increase in revenues.

The recently released housing data has been fairly upbeat with reports of higher sales of new single-family houses coupled with mid-single-digit growth in housing starts. Further, a strong home remodeling market, along with strong job data and rising consumer confidence, is also doing the trick for these stocks.

So far, some of the leading homebuilding companies have reported their Q2 results. While the bottom line of companies like Pulte Group Inc. PHM, Emcor Group Inc. EME, Masco Corporation MAS, Meritage Homes MTH, Rayonier Inc. RYN managed to beat estimates for the quarter, Vulcan Materials Company’s VMC adjusted earnings missed the Zacks Consensus Estimate.

With more and more companies scheduled to report their Q2 numbers this week, let us look at how these four leading construction companies are placed ahead of their earnings release.

Real estate investment trust (“REIT”) Weyerhaeuser Company WY is expected to report Q2 results on Aug 5. The company has an Earnings ESP of 0.00% and carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increase the predictive power of an earnings beat, a 0.00% Earnings ESP complicates our surprise prediction. In the four trailing quarters, Weyerhaeuser posted better-than-expected results in three and recorded in-line results in one. The company delivered an average positive earnings surprise of 19.91%. Last quarter, the company’s earnings of 24 cents per share exceeded the Zacks Consensus Estimate of 20 cents.

Financial performance of Weyerhaeuser is highly dependent on the U.S. housing market. Notably, housing starts in the country increased 3.8% in April, fell 1.7% in May and grew 4.8% in Jun 2016. We expect the recovering U.S. housing markets to have benefited the company’s Timberlands and Wood Products segments in the quarter. However, Weyerhaeuser is exposed to risks associated with near-term headwinds like stiff competition, adverse currency translation and geopolitical issues. The Zacks Consensus Estimate for the quarter is pegged at 20 cents per share. (Read: Weyerhaeuser to Report Q2 Earnings: What to Expect?)

WEYERHAEUSER CO Price and EPS Surprise

WEYERHAEUSER CO Price and EPS Surprise | WEYERHAEUSER CO Quote

Building products company Installed Building Products, Inc. (IBP) is set to report Q2 results on Aug 5. The company carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. It reported a positive earnings surprise of 66.67% in the preceding quarter and an average positive surprise of 10.22% for the trailing four quarters. The Zacks Consensus Estimate for earnings is currently pegged at 37 cents per share for Q2.

INSTALLED BUILD Price and EPS Surprise

INSTALLED BUILD Price and EPS Surprise | INSTALLED BUILD Quote

Stay tuned! Check later on our full write-up on earnings releases of these stocks.

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MASCO (MAS): Free Stock Analysis Report
 
WEYERHAEUSER CO (WY): Free Stock Analysis Report
 
RAYONIER INC (RYN): Free Stock Analysis Report
 
VULCAN MATLS CO (VMC): Free Stock Analysis Report
 
EMCOR GROUP INC (EME): Free Stock Analysis Report
 
PULTE GROUP ONC (PHM): Free Stock Analysis Report
 
MERITAGE HOMES (MTH): Free Stock Analysis Report
 
INSTALLED BUILD (IBP): Free Stock Analysis Report
 
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