For making big profits from stocks, one needs to identify not just the right stock but also the right upswing in a sector. The construction sector in the US economy seems to be catching steam and investors in US stocks may consider investing in some of the stocks in that industry. The earnings season is throwing up such opportunities for global investors. The Q1 results and rising estimates outlook for the economically sensitive sectors like Basic Materials, Industrial Products, Construction, Autos, and others have been impressive. The earnings outlook for all of these sectors is extremely good.
According to Zacks Investment Research, the Zacks Construction sector has been on an impressive growth trajectory since the pre-Covid period, with the pandemic and favorable interest rate backdrop adding to space’s momentum. The space is on track for record earnings and revenues, with the aggregate totals far exceeding what we saw at the top of the housing boom.
Zacks Research in its latest report states that the construction sector’s 2021 profitability is more than twice what the sector earned at the peak of the housing bubble in 2005.
The chart below shows the Zacks Construction sector’s earnings on an annual basis, with 2021 on track to reach $21.5 billion.
Some of the constituent stocks in the Zacks Construction sector include operators like D.R. Horton (DHI), Lennar Corp. (LEN), Quanta Services (PWR) and others which have been literally on fire over the last one-year, compared to S&P 500 index.
With results from 92.9% of the Construction sector companies in the S&P 500 index already out, total Q1 earnings for these companies are up +60.6% on +11% higher revenues, with 92.3% beating EPS estimates and 61.5% beating revenue estimates. The post-release stock market reaction has been strongly positive for the Construction stocks.
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