5 Construction Stocks Likely to Beat Q1 Earnings Estimates

Core Viewpoint - The Zacks Construction sector is expected to report improved results due to a recovering housing market and the Federal Reserve's decision to pause interest rate hikes, with new single-family construction projects offsetting the lack of non-residential infrastructure projects [1] Factors Shaping Quarterly Performance - The performance of the Zacks Construction sector in Q1 2024 will be influenced by distinct trends in residential and non-residential markets [2] - Rising mortgage rates, which have remained between 6.6% and 7% since the start of 2024, are hindering potential buyers in the housing industry [2] - Weather-related impacts and high labor costs may negatively affect overall performance, but limited existing home availability, increased repair and remodeling activities, and cost management efforts are likely to drive growth [2] Non-Residential Market Insights - The non-residential sector benefits from global trends in infrastructure modernization, energy transition, national security, and supply-chain investments [3] - Investments in telecommunications networks, particularly in 5G technologies, as well as environmental remediation and climate resilience, are expected to support performance [3] - Challenges such as weather-related issues, capital spending fluctuations, and commodity price volatility remain concerns [3] Q1 Expectations - Overall earnings for the Zacks Construction sector are projected to rise by 3.8% in Q1 2024, an increase from the 2.6% growth in Q4 2023 [4] - Revenue growth is expected to be 4.2%, showing a deceleration from the 5.1% growth in the previous quarter [4] Stock Picks - The Zacks methodology identifies five construction stocks likely to exceed earnings estimates this earnings season: United Rentals, KBR, Boise Cascade, Louisiana-Pacific, and Dream Finders Homes [3][5] - Stocks with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) combined with a positive Earnings ESP have a 70% chance of beating earnings estimates [5] Winning Stocks - United Rentals is expected to report Q1 2024 results on April 24, with an EPS estimate of $8.35, reflecting a 5% increase year-over-year [7] - KBR is set to report on April 30, with an EPS estimate of $0.70, indicating a 4.5% increase from the previous year [8] - Boise Cascade's EPS estimate is $2.29, showing a 5.8% decline year-over-year, but it benefits from a vertically integrated business model [9] - Louisiana-Pacific's EPS estimate is $1.13, representing a 232.4% increase from the prior year, supported by strategic investments and cost-reduction initiatives [10] - Dream Finders Homes has an EPS estimate of $0.70, indicating a 55.6% increase year-over-year, driven by strong product demand [10]