The Zacks Analyst Blog Highlights Toll Brothers, Century Communities, Armstrong World, Summit Materials and Masco
For Immediate Release
Chicago, IL – March 21, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Toll Brothers, Inc. TOL, Century Communities, Inc. CCS, Armstrong World Industries, Inc. AWI, Summit Materials, Inc. SUM and Masco Corp. MAS.
Here are highlights from Wednesday’s Analyst Blog:
New Housing Starts & Permits Soared Last Month: 5 Top Picks
The month of February saw blistering growth in U.S. housing amid concerns surrounding rising raw material prices.
U.S. home construction surged in February, marking a significant rebound from weather-related setbacks seen earlier in the year. This resurgence is particularly beneficial for homebuilding companies, driven by factors comprising slightly more favorable mortgage rates and a shortage of existing houses for sale.
Despite challenges posed by higher mortgage rates, builders are adapting by implementing strategies such as price reductions and offering incentives to stimulate sales. Additionally, they are adjusting the size of homes being built to mitigate the impact of rising material costs. These measures not only support the industry's resilience but also present opportunities for homebuilding companies to thrive in the current market conditions.
Key Takeaways
According to Commerce Department data released on Mar 19, housing starts jumped 10.7% month over month to a seasonally adjusted annual rate of 1.521 million units in February, beating the consensus estimate of 1.453 million units by 4.7%. Also, the February figure rose 5.9% on a year-over-year basis. The January figure was also revised upward to 1.374 million units from 1.331 million units reported previously.
Adding to the positives, residential building permits — an indicator of construction activity — leaped 1.9% month over month and 2.4% year over year in February to an annualized rate of 1.518 million units. The February permit level surpassed analysts’ prediction of 1.490 million units by 1.9%. The January figure was also revised upward to 1.489 million units from 1.470 million units reported previously. Also, permits for multi-family homes increased 2.4% last month from January but were down 32.8% year over year.
Notably, single-family homebuilding starts — accounting for the lion’s share of the housing market — jumped 11.6% in February from January and 35.2% year over year.
Trends to Rule Housing
Any changes in the federal funds rate can affect mortgage rates, and the Federal Reserve's anticipation of potential rate cuts in the latter part of 2024 is expected to provide stability for homebuilders.
Additionally, data from the Freddie Mac Primary Mortgage Survey reveals that the 30-year fixed mortgage rate stood at 6.74% as of Mar 14, 2024, a decline from 6.88% the previous week. This marks the second consecutive week of decreasing borrowing costs for home loans, driving the average long-term U.S. mortgage rate to its lowest point since early February. This reduction in rates is promising for individuals planning to purchase homes as the spring homebuying season commences.
Furthermore, the sentiment among homebuilders echoes this positive trend. The National Association of Home Builders/Wells Fargo Housing Market Index, recently published, indicates that homebuilder sentiment increased three points to 51 in March. This marks the fourth consecutive month of growth in sentiment among homebuilders.
However, with robust buyer demand persisting and the anticipation of more consumers entering the market amid declining mortgage rates, companies are likely to encounter obstacles linked to elevated building expenses. Builders may confront difficulties due to the upward trajectory of material prices, notably lumber, in the future.
Stocks to Bet On
Adding some stocks, which have been cashing in on the positive market dynamics, looks like a smart move at this point.
Yet, picking winning stocks is no mean feat at the moment. With the help of the Zacks Stock Screener, we have zeroed in on five stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and favorable metrics.
Various companies from the broader Construction sector have been registering gains from the positive momentum of the industry. Notable among them are Toll Brothers, Inc., Century Communities, Inc., Armstrong World Industries, Inc., Summit Materials, Inc. and Masco Corp.
Toll Brothers — a Horsham, PA-based homebuilder — currently flaunts a Zacks Rank #1. Shares of the company have surged 108.5% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
TOL’s EPS estimates for fiscal 2024 have increased to $13.72 from $12.23 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 30.2%. TOL’s earnings are expected to rise 11% year over year in fiscal 2024.
Century Communities — a Greenwood Village, CO-based homebuilder — currently flaunts a Zacks Rank #1. Shares of the company have soared 48% over the past year.
CCS’ EPS estimates for 2024 have increased to $10.06 from $8.78 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 49.2%. CCS’ earnings are expected to rise 24.4% year over year in 2024.
Armstrong World Industries — a Lancaster, PA-based leading global producer of ceiling systems — currently sports a Zacks Rank #1. The company’s shares have surged 78.4% over the past year.
AWI’s EPS estimates for 2024 have increased to $5.74 from $5.52 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 13.1%. AWI’s earnings are expected to rise 7.9% year over year in 2024.
Summit Materials — a Denver, CO-based vertically integrated construction materials company — currently flaunts a Zacks Rank #1. Shares of the company have gained 53.6% over the past year.
SUM’s EPS estimates for 2024 have increased to $2.31 from $2.03 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 18.2%. AWI’s earnings are expected to rise 46.2% year over year in 2024.
Masco — a Taylor, MI-based home improvement and building products maker — currently carries a Zacks Rank #2. Shares of the company have rallied 46.9% over the past year.
MAS’ EPS estimates for 2024 have increased to $4.12 from $4.10 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 23.4%. MAS’ earnings are expected to rise 6.7% year over year in 2024.
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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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Masco Corporation (MAS) : Free Stock Analysis Report
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Century Communities, Inc. (CCS) : Free Stock Analysis Report
Armstrong World Industries, Inc. (AWI) : Free Stock Analysis Report
Summit Materials, Inc. (SUM) : Free Stock Analysis Report
