The second-quarter earnings season appears to be lackluster for the construction stocks due to softness in the housing sector and rising costs. Weak construction spending in the United States, moderating U.S. economic growth and slowdown in other major global economic regions have somewhat offset positive factors like solid job market, increased infrastructure spending (mainly in non-residential areas) and a decline in mortgage rate environment.
Additionally, limited land availability, higher land/labor and material costs, as well as concerns surrounding trade tensions have added to the woes. Despite declining mortgage rates, improving builder sentiments and solid job market, affordability concerns for millennials and first timers remain.
According to the latest Earnings Preview, the construction sector’s earnings, within the S&P 500 cohort, are expected to fall 6.7% year over year in the second quarter compared with 4.9% decline in the preceding quarter. Revenues are also expected to drop 1.1% from the prior-year quarter against 4.6% growth registered in the first quarter.
So far, some of the leading companies in the construction sector, like Lennar Corporation (NYSE:LEN) , United Rentals, Inc. (NYSE:URI) , Fastenal Company (NASDAQ:FAST) and Masco Corporation (NYSE:MAS) have reported Q2 results.
Fastenal, one of the largest wholesale distributors of industrial and construction supplies, reported lower-than-expected second-quarter 2019 earnings and revenues. In fact, its earnings declined 2.7% from the year-ago period due to slower activity levels. Then again, Lennar and United Rentals’ bottom line not only surpassed analysts’ expectations but also grew on an annualized basis.
Construction Stocks Reporting on Jul 31
Let us take a look at how the following construction companies are placed ahead of their upcoming quarterly release on Jul 31.
Our research shows that for companies with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chances of beating earnings estimates are high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
KBR, Inc. (NYSE:KBR) is scheduled to report second-quarter results before the opening bell. In the last reported quarter, the company’s adjusted earnings came in at 36 cents per share, beating the Zacks Consensus Estimate of 33 cents by 9.1%. In fact, KBR surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering average positive surprise of 8.9%.
The company has the right combination of the two key ingredients for likely earnings beat in the to-be-reported quarter. It has an Earnings ESP of +1.16% and carries a Zacks Rank #2.
For the quarter to be reported, the Zacks Consensus Estimate — which has displayed an upward trend over the past 30 days — is currently pegged at 40 cents. This indicates an increase of 17.7% from the year-ago earnings of 34 cents per share. Revenues are expected to be $1.38 billion, up 8.7% year over year.
KBR, Inc. Price and EPS Surprise
Taylor Morrison Home Corporation (NYSE:TMHC) is scheduled to report second-quarter numbers before the opening bell. The company reported better-than-expected results in each of the last four quarters, with the average being 38.7%.
The company has the right combination of elements to deliver an earnings beat in the upcoming report. It has an Earnings ESP of +15.87% and a Zacks Rank #3.
For the quarter to be reported, the Zacks Consensus Estimate has trended upward over the past 30 days and is currently pegged at 63 cents, suggesting 21.2% year-over-year growth. Total revenues are expected to be $1.13 billion, up 15.7% year over year.
Taylor Morrison Home Corporation Price and EPS Surprise
M.D.C. Holdings, Inc. (NYSE:MDC) is scheduled to report second-quarter results before the opening bell. The company’s earnings topped estimates in two of the last four quarters, with the average positive surprise being 8.3%.
Meanwhile, our proven model hints at an earnings beat for the company in the to-be-reported quarter, as M.D.C. Holdings has an Earnings ESP of +2.68% and a Zacks Rank #1.
For the quarter to be reported, the Zacks Consensus Estimate has moved north over the past 30 days and is currently pegged at 78 cents. This indicates 25% decline from the year-ago earnings of $1.04 per share. Revenues are expected to be $736.97 million, down 4.4% year over year.
M.D.C. Holdings, Inc. Price and EPS Surprise
Skyline Champion Corporation (NYSE:SKY) is scheduled to report fiscal first-quarter 2020 results after the closing bell. The company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, delivering average positive surprise of 15.5%.
We cannot conclusively predict a beat for the company in the quarter to be reported as it has an Earnings ESP of 0.00% and a Zacks Rank #3.
The Zacks Consensus Estimate for to-be-reported quarter’s earnings is pegged at 28 cents, indicating an improvement from loss of 2 cents reported in the year-ago period. The consensus estimate for revenues is pegged at $352.6 million, up 9.4% year over year.
Skyline Corporation Price and EPS Surprise
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