5 Construction Stocks Set to Carve a Beat in This Earnings Season

Core Insights - The U.S. construction sector is experiencing slow expansion in Q3 2025, driven by infrastructure development, data center construction, and utility projects, while housing and conventional commercial categories remain weak [1][2] Construction Sector Performance - Demand is primarily supported by infrastructure and technology initiatives, while traditional commercial and residential markets face financing constraints and reduced demand [2] - Companies in essential sectors are performing well, whereas those focused on discretionary or office spaces are facing significant challenges [2] Earnings Trends - Approximately 25% of S&P 500 companies have reported Q3 earnings, with the construction sector's total earnings down 30.4% year-over-year on 4.8% lower revenues; 75% of these companies beat EPS estimates, and 50% exceeded revenue estimates [4] - Construction sector earnings are expected to decline by 13.8% in Q3 compared to the previous year, a worsening from the 10.4% decline in Q2 2025, while revenues are projected to grow by 1.1% [9] Factors Influencing Construction Activity - AI-related data center development is a significant driver of construction activity, with hyperscale operators expanding capacity, leading to increased building work and upgrades in electrical and power transmission [5] - Public investment, particularly from federal infrastructure programs, is converting planned projects into actual construction, supported by incentives for clean energy and federal spending through various acts [6] - Industrial reshoring continues to support domestic manufacturing and logistics, with steady demand from technology, healthcare, and institutional sectors [7] Challenges in the Sector - Residential construction is struggling due to high borrowing costs, affordability issues, and weak demand, particularly in multifamily housing [8] - Labor shortages remain a critical constraint, affecting project schedules, while rising materials and equipment costs continue to pressure margins and new starts [8] Company Highlights - Companies such as MasTec, AAON, Vulcan Materials, Johnson Controls, and EMCOR are expected to perform well in the upcoming earnings season, with several poised to beat earnings expectations [3][12][14][15][16][19] - MasTec is projected to report a 41.7% increase in EPS year-over-year, while Vulcan anticipates a 20.7% improvement [13][16] - EMCOR is expected to show a 14.7% growth in EPS compared to the previous year [19]