The Zacks Analyst Blog Highlights Willdan Group, PotlatchDeltic, Louisiana-Pacific, Boise Cascade and AECOM
For Immediate Release
Chicago, IL – July 31, 2023 – 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: Willdan Group, Inc. WLDN, PotlatchDeltic Corp. PCH, Louisiana-Pacific Corp. LPX, Boise Cascade Co. BCC and AECOM ACM.
Here are highlights from Friday’s Analyst Blog:
5 Construction Stocks Set to Beat This Earnings Season
Higher infrastructural activities are expected to partly offset the challenges associated with slow residential activities compared with the year ago in the Construction sector during the second quarter of 2023.
Per the latest Earnings Outlook, the Q2 earnings season has so far seen releases from approximately 56.1% of the construction sector's market capitalization on the S&P 500 Index. Of them, the sector's total earnings are down 11.9% from the year-ago period on 3.5% higher revenues, with 100% beating earnings per share estimates and 83.3% beating revenue estimates.
With the help of the Zacks Stock Screener, we have identified five construction stocks, namely Willdan Group, Inc., PotlatchDeltic Corp., Louisiana-Pacific Corp., Boise Cascade Co. and AECOM , which are poised to beat the Zacks Consensus Estimate this earnings season.
Factors Influencing Quarterly Results
Within the broader construction sector, the residential market continues to grapple with accelerating mortgage rates, rising raw material and labor costs. The companies, which are more associated with the residential market, are expected to have witnessed a decline in earnings in the quarter from the year-ago level due to the moderation of demand amid rising mortgage rates. That said, the desire to own a home amid a lack of existing homes for sale, higher repair and remodeling activities, focus on cost control, increased operating leverage and important buyouts will likely help the companies to show resilient growth sequentially.
On the other hand, the non-residential players are expected to have benefited from the high demand for infrastructure solutions that support energy-transition initiatives and increase reliability, safety and efficiency. Strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments will aid the companies to post solid quarterly results. Also, funding for telecommunications networks to provide gigabit network speeds to individual consumers and businesses directly or wirelessly using 5G technologies is likely to have acted as the tailwind for the companies' quarterly performance.
Overall, prudent cost-saving efforts, a disciplined approach in bidding, project management, strength in funding programs across the states, and higher demand for road repair and maintenance along with bolt-on acquisitions are anticipated to have supported their performances and expanded their geographical reach and product portfolio in the quarter.
Q2 Expectations
The overall estimate picture is not an attractive one for the broader Zacks Construction sector amid challenges associated with the soft residential market, inflation, labor constraints and project delays from the year-ago perspective. Per the latest Earnings Outlook, construction sector earnings are expected to decrease 14.3% for the second quarter. This indicates an improvement from 19.1% decline registered in first-quarter 2023. Revenues are projected to increase 3.4%, suggesting an improvement from 2.8% growth registered in the prior quarter.
Which are the Right Picks?
Given the headwinds, it is not easy to find stocks with the potential to trump earnings estimates. Here, the Zacks methodology comes in handy as it helps identify stocks that not only boast solid fundamentals but are also poised to beat estimates this earnings season.
One can narrow down the list with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they report with our Earnings ESP Filter.
Our research shows that for stocks with this combination, the chances of delivering earnings beat are as high as 70%.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances of coming up with an earnings beat in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Winning Stocks
For investors willing to adopt this strategy, we have highlighted five construction stocks that may stand out this earnings season.
Willdan Group— a Anaheim, CA-based professional, technical and consulting services provider primarily in the United States — topped earnings estimates in two of the trailing four quarters and missed the other two occasions, with the average being 1,289.3%.
Willdan is likely to beat expectations when it reports second-quarter 2023 results on Aug 3, after market close. This Zacks Rank #3 company has an Earnings ESP of +108.33%.
Growing demand in diverse end markets, including transmission, power and other infrastructure projects, is expected to support growth. The Zacks Consensus Estimate for Willdan's second-quarter earnings is pegged at 12 cents, implying growth of 300% from the year-ago reported figure.
PotlatchDeltic — a leading Real Estate Investment Trust (REIT) — topped earnings estimates in three of the trailing four quarters and missed once, with the average being 16.8%.
PotlatchDeltic is likely to beat expectations when it reports second-quarter 2023 results on Jul 31, after market close. This Zacks Rank #3 company has an Earnings ESP of +11.77%.
Soft housing activity compared with the year-ago period is expected to impact the company's performance. Resilient Timberlands and Real Estate business activities will offset weakness in Wood Products to some extent. The Zacks Consensus Estimate for PotlatchDeltic's second-quarter earnings is pegged at 9 cents, implying a decline of 94.4% from the year-ago reported figure.
Louisiana-Pacific— a Nashville, TN-based home construction supplier — topped earnings estimates in three of the trailing four quarters and missed once, with the average being 98.2%.
Louisiana-Pacific is likely to beat expectations when it reports second-quarter 2022 results on Aug 2, before the opening bell. This Zacks Rank #3 company has an Earnings ESP of +5.54%.
Its strategic business transformation, cost-saving efforts and inorganic moves are anticipated to have acted as tailwinds for the second quarter. However, the company's earnings and revenues are likely to decline in the quarter, given the soft housing market, depressed OSB prices and investment-related expenses on a year-over-year basis.
For second-quarter 2023, the company expects Siding Solutions revenues to decline up to 5% from the year-ago period's reported figure. Oriented Strand Board or OSB revenues are expected to be up approximately 20% sequentially. It anticipates a consolidated adjusted EBITDA to be more than $80 million. The Zacks Consensus Estimate for Louisiana-Pacific's second-quarter earnings is pegged at 64 cents, implying a decline of 84.7% from the year-ago reported figure.
Boise, ID-based Boise Cascade — which makes wood products and distributes building materials in the United States as well as Canada — topped earnings estimates in three of the trailing four quarters and missed once, with the average surprise being 19%.
Boise Cascade is likely to beat expectations when it reports second-quarter 2023 results on Jul 31, after market close. This Zacks Rank #1 company has an Earnings ESP of +2.36%. The Zacks Consensus Estimate for BCC's second-quarter earnings is pegged at $2.54 per share, implying a decline of 53.7% from the year-ago reported figure.
The U.S. housing market softness, given the increased mortgage rates and economic uncertainties, is quite likely to have put pressure on Boise Cascade's second-quarter 2023 results on a year-over-year basis. (Read more: Boise Cascade to Report Q2 Earnings: What's in Store?)
We are also counting on AECOM — a Los Angeles, CA-based company — that delivers professional services for program and construction management in the Americas, Europe, the Middle East, Africa and Asia Pacific.
The company beat earnings estimates in all the last four quarters, with the average surprise being 4.8%. The company is poised to beat expectations when it reports third-quarter fiscal 2023 results on Aug 7, after market close.
It carries a Zacks Rank #2 and has an Earnings ESP of +1.05%, at present. AECOM's strength across core transportation, water and environment markets is likely to support growth. Global infrastructure and long-term supply chain and energy transitions are expected to act as tailwinds. The Zacks Consensus Estimate for AECOM's fiscal third-quarter earnings is pegged at 95 cents per share, implying growth of 10.5% from the year-ago reported figure.
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AECOM (ACM) : Free Stock Analysis Report
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Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
