3 Homebuilding Stocks for Spring Construction
The housing start numbers came in below the street's
expectations this morning, though the shortfall was a bit less
pronounced that was the case last month. Like most recent
economic data, the Polar Vortexes caused a slump in the overall
numbers for January and early February. While new
construction dipped from 909,000 in January to 907,000 in
February, there was a silver lining in the housing report.
New building permits rose 7.7%, their highest rate since
October, and more importantly, to the second highest rate since
the middle of 2009. The main catalysts behind the increase
in new building permits were condominiums and rental apartment
The permits gain is reassuring, given recent signs that the
housing recovery might be losing steam. Monday's
homebuilder sediment index came in below the 50 level, the
dividing line between expanding and contracting activity
levels. The weather has no doubt been a major headwind for
the sector, though builders seem to be facing other issues as
well, like shortage of building lots, skilled labor, and low
inventory of new homes for sale. The strong permits number
shows that we can expect steady gains in construction activities
over the spring and summer months.
Companies To Consider
Universal Forest Products
) is currently a Zacks Rank #1 (Strong Buy), and has produced an
average Positive Earnings Surprise of 661.69% over the past four
quarters. UFPI supplies wood and wood alternative products
for retail home building centers and other retailers.
Universal Forest Products also offers structural lumber and other
products for the manufactured housing industry.
Over the past thirty days, UFPI's earnings estimates have
risen from $0.41 to $0.47 for Q1 2014. Moreover, earnings
estimates for the fiscal year 2014 have increased from $3.12 to
$3.30; which would translate to a 55.66% year over year growth
The Price & Consensus chart below adequately captures the
company's strong momentum.
) is a Real Estate Investment Trust with two major segments; the
Resource Management division, which owns and manages timberlands,
and the Wood Products division, which manufactures the lumber and
then sells it to wholesalers for the primary purpose of home
building and construction activities.
Currently, Potlatch carries a Zacks Rank #2 (Buy), and has
seen their earnings estimates rise over the past sixty
days. Q1 2014 earnings estimates have risen from $0.41 to
$0.46, and Fiscal Year 2014 earnings estimates have also
increased from $1.86 to $1.91. Moreover, Potlatch has
produced an average positive earnings surprise of 24.10% over the
past four quarters.
) specializes in homebuilding activities throughout the entire
USA. Primarily, LEN develops multifamily rental properties,
single family homes, and detached homes. Lennar Corp
currently carries a Zacks Rank #2 (Buy), and has produced four
consecutive Positive Earnings Surprises with an average Positive
Surprise of 40.44%. Furthermore, over the past sixty days,
Fiscal Year earnings estimates have risen from $2.42 to
This year's winter impacted many companies throughout all
sectors, and the threat of more inclement weather is not yet
behind us. This nasty weather has caused many companies to
lower guidance, and overall, we have seen many estimates fall for
Q1 2014. But with housing permits increasing over 7%, and
spring quickly approaching, the outlook for homebuilders looks
promising, with room to grow beyond the spring building
So if you are inclined to invest in the homebuilding segment,
you should strongly consider Universal Forest Products, Potlatch
Corp, and Lennar Corp.
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LENNAR CORP -A (LEN): Free Stock Analysis
POTLATCH CORP (PCH): Free Stock Analysis
UNIVL FST PRODS (UFPI): Free Stock Analysis
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