Construction Stocks Q1 Earnings On May 8: MLM, SUM & More
Zacks Investment Research | May 06, 2018 09:15PM ET
Robust gains from home building investments, strong economic growth and recent tax reforms are working in favor of the construction sector. Moreover, modest wage growth, low unemployment and positive consumer confidence are positives. Also, President Trump’s promise to double economic growth through a stimulus program that includes tax cuts, deregulation and higher infrastructure spending are likely to keep the sector on a growth trajectory.
Notably, per the latest U.S. Census Bureau report, construction spending in March dropped 1.7% from the previous month. However, for the first three months of 2018, the metric increased 5.5% from the year-ago period.
Importantly, political and economic uncertainties continue to affect the sector. One such obstacle is the recent imposition of tariffs on imported steel and aluminum. An increase in import tariff will escalate raw material cost for builders, which are grappling with increased cost, thanks to the imposition of lumber tariff. This along with high cost of land and labor as well as mortgage rate hikes raises concern.
The implications of the metal tariffs and mortgage hike are yet to be felt in the sector that has occupied the third position out of 16 sectors based on the Zacks classification. Notably, a sector with a larger percentage of Zacks Rank #1 (Strong Buy) and 2 (Buy) stocks will have a better average than the rest.
Q1 Earnings
The first-quarter earnings season is well past the halfway mark, with earnings and revenue growth set to reach highest level in the last seven years. So far, the earnings season has seen releases from 409 S&P 500 members, with 78% beating EPS estimates and 75.6% beating revenue estimates.
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