Here's Why TopBuild (BLD) Surged 132% in the Past Year
The Federal Reserve's recent decision to maintain a steady interest level bodes well for housing market-related industry companies like TopBuild Corp. BLD, a sense of relief. The Federal Open Market Committee (“FOMC”) unanimously decided to keep the interest rate benchmark between 5.25% and 5.5%. Furthermore, FOMC not only considered holding onto the benchmark but also anticipates at least three rate cuts in the upcoming year.
Apart from the macro tailwind, TopBuild is also benefiting from its focus on multifamily works and commercial projects, along with ensuring operational excellence across its business operations.
Shares of this installer and distributor of insulation and other building products have surged 131.9% in the past year, outperforming the Zacks Building Products - Miscellaneous industry’s 48.6% growth. Increasing demand for commercial projects and multifamily homes has offset the headwinds from softer single-family demand patterns to much extent, thus driving the uptrend.
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This Zacks Rank #2 (Buy) company’s earnings estimates for 2023 have moved north to $19.66 per share from $19.35 over the past 30 days. TopBuild also delivered a trailing four-quarter earnings surprise of 14.3%, on average. Furthermore, the growth prospect is solidified with a VGM Score of A, backed by a Value Score of A and a Growth Score of B. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and the continuation of an outperformance in the near term.
Here’s What Makes the Stock Attractive
Focus on Multifamily Bodes Well: Due to affordability issues and increased interest rates, the demand for single-family homes is on the softer side. Although the scenario is expected to normalize in the upcoming period, the current soft demand pattern has affected TopBuild’s top line to some extent. This effect was more than offset by the increased demand for multifamily works. The company expects that the demand pattern is likely to continue in 2024 as well, thus contributing to its growth.
Commercial Installation Driving Growth: On the commercial installation front, TopBuild is witnessing strong bidding activity across its heavy commercial branches, resulting in an increased number of contracts. This uptrend in project wins is contributing to its solid backlog levels. Its current ongoing projects include the renovation of the SeaTac Airport in Washington State, the new Hard Rock Casino in Virginia and various large medical projects. Thanks to the tailwinds, in the third quarter of 2023, the company’s commercial installation business was up 9.4% year over year.
Furthermore, to aid against the ongoing odds, the maintenance and repair work on many commercial and industrial sites serves as a stabilized form of revenue generation. TopBuild is optimistic about its growth opportunities in commercial and industrial end markets in the United States and Canada.
Impressive Earnings Surprise History: TopBuild showcases an impressive earnings surprise history. The company reported an earnings beat in 13 of the trailing 14 quarters, thus solidifying its growth trends.
Furthermore, in third-quarter 2023, earnings topped the Zacks Consensus Estimate by 18.3% and increased 13.1% year over year. For the to-be-reported quarter, the company’s earnings estimates are expected to portray 4.6% year-over-year growth.
Other Key Picks
Here are some other top-ranked stocks from the Construction sector.
EMCOR Group, Inc. EME presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
It has a trailing four-quarter earnings surprise of 25%, on average. Shares of EME have soared 47.5% in the past year. The Zacks Consensus Estimate for EME’s 2023 sales and earnings per share (EPS) indicates an improvement of 12% and 52.8%, respectively, from the prior-year levels.
M-tron Industries, Inc. MPTI currently sports a Zacks Rank of 1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average. It has surged 217.1% in the past year.
The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year.
Willdan Group, Inc. WLDN currently sports a Zacks Rank of 1. WLDN delivered a trailing four-quarter earnings surprise of a whopping 850.6%, on average. The stock has gained 13% in the past year.
The Zacks Consensus Estimate for WLDN’s 2023 sales and EPS indicates growth of 14.1% and 47.7%, respectively, from a year ago.
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