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D.R. Horton, Lennar Corp and Quanta Services are part of Zacks Earnings Preview

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·5 min read
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For Immediate Release

Chicago, IL – May 10, 2021 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes D.R. Horton, Inc. DHI, Lennar Corporation LEN, Quanta Services, Inc. PWR.

Earnings Boom for Housing and Construction

Our take on the Q1 earnings season has been justifiably positive, with the reported results handily exceeding expectations and management guidance and qualitative commentary leading to raised expectations for the current and coming periods.

We tend to dwell a lot on the Technology and Finance sectors as we look for earnings trends in the aggregate, as these two sectors combined account for so much of the total earnings pie. Over the coming four quarters, these two sectors are expected to bring in 47.4% of all S&P 500 earnings. As such, what happens in these two sectors have a big impact on the aggregate growth picture.

We have been showing in this space how strong the earnings performance in the Finance and Technology sectors has been. The goal in this piece is to share with you the very impressive Q1 results and rising estimates outlook for the economically sensitive sectors like Basic Materials, Industrial Products, Construction, Autos and others.

The earnings outlook for all of these sectors is extremely good. We will feature these sectors individually in this space in the coming weeks, starting with the Construction sector today.

The Zacks Construction sector has been on an impressive growth trajectory since the pre-Covid period, with the pandemic and favorable interest rate backdrop adding to the space’s momentum. The space is on track for record earnings and revenues, with the aggregate totals far exceeding what we saw at the top of the housing boom.

You would be 100% correct in expecting the constituent stocks in the Zacks Construction sector, which have been listed at the bottom of the above chart and includes operators like D.R. Horton, Lennar Corp., Quanta Services and others, have been literally on fire.

The group’s Q1 earnings performance has been very impressive. With results from 92.9% of the Construction sector companies in the S&P 500 index already out, total Q1 earnings for these companies are up +60.6% on +11% higher revenues, with 92.3% beating EPS estimates and 61.5% beating revenue estimates.

Unlike the market’s tepid response to the blockbuster Tech sector results, the post-release stock market reaction has been strongly positive for the Construction stocks.

Q1 Earnings Season Scorecard (As of Friday, May 7th)

We now have Q1 results from 440 S&P 500 members or 88% of the index’s total membership. Total earnings (or aggregate net income) for these 440 companies are up +46.6% from the same period last year on +9.8% higher revenues, with 86.1% beating EPS and 76.8% beating revenue estimates.

The reporting cycle starts winding down for these large-cap companies going forward, though hundreds of other companies (outside of the S&P 500 index) are still to report Q1 results. This week brings in results from more than 600 companies in total, including 17 S&P 500 members.

Overall Expectations for 2021 Q1

Looking at Q1 as a whole, combining the actual results that have come out with estimates for the still to come companies, total earnings for the S&P 500 index are expected to up +46.2% on +9.4% higher revenues. In other words, the remaining 60 index members still-to-report Q1 results aren’t expected to move the growth needle in any significant way.

We envision favorable revisions trends to accelerate over the next few months as the vaccination effort reaches a critical mass and greater ‘normalcy’ returns to life.

For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report: A Positive Earnings Backdrop

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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