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Construction Stock Earnings Slated for Feb 7: VMC, LII, ACM

After a string of releases by construction companies, we are gearing up for the next batch of fourth-quarter earnings reports this week. Overall, earnings growth for the quarter is on track to mark growth and construction seems to be one of the stand-out sectors.

The Q4 earnings season has so far seen quarterly releases from 53.8% of the construction companies in the S&P 500 cohort. According to the latest Earnings Preview report, 71.4% of the companies have surpassed earnings as well as revenue expectations. Total earnings at these construction companies increased 10.2% on 10.7% higher revenues.

Although the momentum at the start of 2017 seems to have lost steam as mortgage rates have been inching up since the November presidential election, sales of new homes grew 12.2% in 2016 from a year earlier - marking the best in a decade. Sales growth during 2016 was majorly boosted by affordable mortgage rates and a steadily improving job market.

Positives like a healthier economy, improving employment levels, positive consumer confidence and a tight supply situation raise optimism about the sector's performance in 2017.

So far, some of the leading companies in the construction sector have reported their Q4 results. D.R. Horton, Inc. DHI exhibited an impressive performance in the first quarter of fiscal 2017 , with earnings and revenues beating the Zacks Consensus Estimate by 17% and 6.8%, respectively. M.D.C. Holdings Inc. MDC reported fourth-quarter 2016 earnings of 78 cents per share, beating the consensus mark by 10 cents. The homebuilder also posted revenues of $736.3 million in the quarter, surpassing the Zacks Consensus Estimate of $680 million.

Let us take a look at how these three construction companies are placed ahead of their quarterly releases on Feb 7.

Vulcan Materials CompanyVMC is scheduled to release fourth-quarter 2016 financial numbers, before the opening bell.

The company is the largest producer of construction aggregates in the U.S., one of the leading producer of asphalt mix and concrete, and a major manufacturer of cement in Florida.

Most importantly, the aggregates industry is characterized by high barriers to entry as there are limited substitutes for quality aggregates, thus placing Vulcan favorably. Moreover, residential housing starts as well as non-residential contract awards improved steadily in the first nine months of 2016, driven by job growth and general economic recovery. The trend is expected to continue in the fourth quarter.

The company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).

Our model suggests that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat earnings. In this case, our proven model does not conclusively show that Vulcan is likely to beat earnings this quarter.

In the last reported quarter, the company had posted a negative 9.8% earnings surprise. Notably, the company surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average earnings beat of 83.9%.

For the fourth quarter of 2016, the Zacks Consensus Estimate for earnings is pegged at 83 cents a share, reflecting an increase of 12.5% year over year, while the consensus for revenues is at $914.6 million, implying a 6.7% year-over-year decline (read more: Vulcan Materials Q4 Earnings: What's in the Cards? ).

Vulcan Materials Company Price and EPS Surprise

Vulcan Materials Company Price and EPS Surprise | Vulcan Materials Company Quote

Lennox International, Inc.LII , a leading global provider of climate control solutions, is slated to report its fourth-quarter 2016 numbers before the market opens.

Last quarter, the company posted a positive earnings surprise of 3.56%. The company surpassed estimates in all of the past four quarters and has an average positive surprise of 3.14%.

Our proven model does not conclusively predict an earnings beat for Lennox this quarter as it has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $1.40, reflecting a 26.1% year-over-year rise, while the consensus for revenues is at $880.4 million, implying 5.6% year-over-year growth (read more: Lennox Q4 Earnings: What's in Store for the Stock? ).

Lennox International, Inc. Price and EPS Surprise

Lennox International, Inc. Price and EPS Surprise | Lennox International, Inc. Quote

AECOMACM will report its first-quarter fiscal 2017 on Feb 7. The company specializes in providing integrated services for planning, construction and maintenance of infrastructure that includes consulting, architecture, engineering as well as managing the requirements for energy, water and environment for private and public clients. Its Construction services business has been doing well on the back of bountiful opportunities in the building construction market.

The company's business segments, namely, Building Construction, Management Services and Americas Design have bright prospects. We believe that the positive industry trends, robust backlog levels and the company's dominant position in each market bode well for long-term growth.

At the end of the fiscal fourth quarter, AECOM's total backlog was $42.8 billion, up 4%, thereby signaling at better opportunities going ahead.

That said, investors have to remain cautious owing to a host of macroeconomic issues that include volatility in the oil and gas market and declining prices and spending levels. These factors have been hurting the company's projects and orders.

Last quarter, the company posted a negative earnings surprise of 12.16%. The company surpassed estimates in three of the past four quarters and has an average positive surprise of 8.56%.

Our proven model shows an earnings beat for AECOM this quarter as it has an Earnings ESP of +1.89% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

For the fiscal first quarter, the Zacks Consensus Estimate for earnings is pegged at 53 cents, reflecting a 22.8% year-over-year decline, while the consensus for revenues is at $4.19 billion, implying a 2.5% year-over-year decline.

AECOM Price and EPS Surprise

AECOM Price and EPS Surprise | AECOM Quote

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Lennox International, Inc. (LII): Free Stock Analysis Report

Vulcan Materials Company (VMC): Free Stock Analysis Report

D.R. Horton, Inc. (DHI): Free Stock Analysis Report

M.D.C. Holdings, Inc. (MDC): Free Stock Analysis Report

AECOM (ACM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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