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The Zacks Analyst Blog Highlights: TopBuild, Construction Partners, Great Lakes Dredge & Dock, KBR and Eagle Materials

Zacks Equity Research

For Immediate Release

Chicago, IL – July 3, 2019 – 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: TopBuild BLD, Construction Partners ROAD, Great Lakes Dredge & Dock GLDD, KBR KBR and Eagle Materials EXP.

Here are highlights from Tuesday’s Analyst Blog:

Winning Construction Stocks with Room to Build

The first half of 2019 was dynamic for the construction market. After a sharp selloff in the second half of 2018, rising demand, declining mortgage rates and solid economic fundamentals took most of the sting out of this hostile situation.

The construction sector grew almost 25% in the first six months of 2019, higher than the broader market’s (S&P 500) rally of 16.1%. Increased infrastructure spending, mainly in non-residential areas, along with the Fed’s dovish stance, ongoing job growth and rising wages, is contributing to the gradual improvement in marketplace.

Notably, spending grew in double digits in areas like highway and street, sewage and water disposal, transportation, water supply, and manufacturing during the first five months of 2019. Meanwhile, although residential outlays remained in a soft patch as home building fell for the fifth straight month in May, per the latest Commerce Department report, the only positive is new multi-family homes spending, which was up 9.3% during the period.

Insights Into Sector’s Prospects for 2H

After GDP growth of 2.9% in 2018, U.S. economic growth is expected to shift to lower gear at a 2.1% pace in 2019, according to Fed projections. GDP advanced at a 3.1% annualized rate in the first quarter, driven by a large increase in inventories of unsold goods and an improved trade balance, neither of which is expected to be repeated. The U.S. economy is expected to grow at a 1.5% annualized rate in the second quarter, the Atlanta Federal Reserve’s GDPNow forecast model showed on Jul 1.

Indeed, the construction market, the fate of which is tied to broader economic growth, is expected to suffer thanks to rising raw material costs, a weak housing market and a slowdown in global economy. Meanwhile, trade tensions with China and Mexico have been upsetting businesses and dampened consumer confidence.

Nonetheless, the truce in trade war is a boon to the construction market. In a tentative plan to end the trade war, President Donald Trump de-escalated the ongoing trade war with China on Jun 29 at the G20 summit in Japan, where he announced that the United States would not be adding the planned 25% tariffs on $300 billion worth of Chinese goods.

Also, the Fed recently signaled that it will cut interest rates if damage from President Trump’s trade battles with China and Europe, slowing global growth and geopolitical tensions threaten to curtail the U.S. economy further.
In a nutshell, lower interest/mortgage rates along with steady job and wage growth is expected to drive the construction sector. Although spending on residential construction has been weak for a number of months, builders are hopeful that declining mortgage rates will spur a rebound.

Construction Stocks that Led the Way

The positive developments led to a few winners in the construction equity space in the first half of 2019 that not only crushed the broad market returns, but also have the potential to outperform in the latter part. Of these, we have selected seven stocks with the help of our Zacks Stock Screener that have a Zacks Rank #1 (Strong Buy) or 2 (Buy), justifying their strong fundamentals. These are, namely, TopBuild, Construction Partners, Great Lakes Dredge & Dock, KBR and Eagle Materials, among others.

As per the Zacks Sector Rank, the Zacks Construction sector is currently #2 out of 16 (top 14%), mirroring analysts’ optimism on the market’s earnings growth potential.

A solid sector rank and a VGM Style Score of B or better is quite a combination to look out for in stocks, especially for investors beefing up their portfolio in the second half amid volatility and uncertainty. You can see the complete list of today’s Zacks #1 Rank stocks here.
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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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TopBuild Corp. (BLD) : Free Stock Analysis Report
Eagle Materials Inc (EXP) : Free Stock Analysis Report
Great Lakes Dredge & Dock Corporation (GLDD) : Free Stock Analysis Report
KBR, Inc. (KBR) : Free Stock Analysis Report
Construction Partners, Inc. (ROAD) : Free Stock Analysis Report
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