Press Release: Construction Partners, Inc. Announces Schedule For Fiscal 2024 Fourth Quarter And Full Year Earnings Release And Conference Call

Advanced Drainage Systems (WMS) came out with quarterly earnings of $1.70 per share, missing the Zacks Consensus Estimate of $1.93 per share. This compares to earnings of $1.71 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -11.92%. A quarter ago, it was expected that this maker of water drainage systems and pipes would post earnings of $1.98 per share when it actually produced earnings of $2.06, delivering a surprise of 4.04%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Advanced Drainage, which belongs to the Zacks Building Products - Miscellaneous industry, posted revenues of $782.61 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 4.33%. This compares to year-ago revenues of $780.22 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Advanced Drainage shares have added about 13.1% since the beginning of the year versus the S&P 500's gain of 25.2%.

What's Next for Advanced Drainage?

While Advanced Drainage has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Advanced Drainage: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $1.54 on $690 million in revenues for the coming quarter and $6.95 on $3.01 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Building Products - Miscellaneous is currently in the bottom 47% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, Construction Partners (ROAD), is yet to report results for the quarter ended September 2024.

This road and highway construction company is expected to post quarterly earnings of $0.57 per share in its upcoming report, which represents a year-over-year change of -3.4%. The consensus EPS estimate for the quarter has been revised 5.9% lower over the last 30 days to the current level.

Construction Partners' revenues are expected to be $537.5 million, up 13.2% from the year-ago quarter.

Zacks Investment Research

Installed Building Products (IBP) came out with quarterly earnings of $2.85 per share, missing the Zacks Consensus Estimate of $2.98 per share. This compares to earnings of $2.79 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -4.36%. A quarter ago, it was expected that this residential insulation installer would post earnings of $2.89 per share when it actually produced earnings of $3.02, delivering a surprise of 4.50%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Installed Building Products, which belongs to the Zacks Building Products - Miscellaneous industry, posted revenues of $760.6 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.36%. This compares to year-ago revenues of $706.47 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Installed Building Products shares have added about 24.5% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Installed Building Products?

While Installed Building Products has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Installed Building Products: unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $3.04 on $781.84 million in revenues for the coming quarter and $11.42 on $2.97 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Building Products - Miscellaneous is currently in the top 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Construction Partners (ROAD), has yet to report results for the quarter ended September 2024.

This road and highway construction company is expected to post quarterly earnings of $0.57 per share in its upcoming report, which represents a year-over-year change of -3.4%. The consensus EPS estimate for the quarter has been revised 5.9% lower over the last 30 days to the current level.

Construction Partners' revenues are expected to be $537.5 million, up 13.2% from the year-ago quarter.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 6, 2024 – Today, Zacks Equity Research discusses Arcosa, Inc. ACA, Armstrong World Industries, Inc. AWI, Frontdoor, Inc. FTDR, Construction Partners, Inc. ROAD and Latham Group, Inc. SWIM.

Industry: Building Products

Link: https://www.zacks.com/commentary/2364534/5-building-products-stocks-for-better-returns-despite-the-industry-woes

The Zacks Building Products - Miscellaneous industry has been facing headwinds due to a challenging real estate market and the effects of inflation on consumer sentiment. Nonetheless, increased government infrastructure spending is bolstering companies in the industry. Although potential challenges like macroeconomic uncertainties, new product investments and rising raw material costs could squeeze margins, firms such as Arcosa, Inc., Armstrong World Industries, Inc., Frontdoor, Inc., Construction Partners, Inc. and Latham Group, Inc. stand to gain from operational excellence, geographic and product diversification strategies, strategic acquisitions, and higher infrastructure investments.

Industry Description

The Zacks Building Products - Miscellaneous industry primarily comprises manufacturers, designers and distributors of home improvement and building products like ceiling systems, doors, windows, flooring and metal products. Some industry players provide solutions to rehabilitate the aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries.

The companies also manufacture expansion joints and structural bearings, ventilation products, ground-mounted solar racking and commercial greenhouses, as well as mail storage (solutions including mailboxes along with package delivery products). Companies in this industrial cohort also rent out equipment to a diverse customer base, including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities.

3 Trends Shaping the Future of the Building Products Industry

Rising Costs: Inflationary headwinds with respect to transportation costs, material costs and energy costs have been a pressing concern. Also, rising labor costs are compressing margins. These are dampening the companies' operating performance. Although the industry participants have been working to recover higher costs through various price increases, they expect this ongoing volatility in material and transportation costs to be a concern.

Apart from higher raw material costs, the companies bear expenses related to product launches. If companies are unable to offset these costs through price increases or supply-chain initiatives, their profits may be affected.

Also, the industry's outlook is closely tied to the U.S. housing and renovation markets. However, the challenging real estate environment, coupled with the effects of inflation on consumer confidence, has been weighing on industry players.

U.S. Administration's Infrastructural Spending: The industry players are expected to benefit from strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments. The U.S. administration's endeavor to rebuild the nation's deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to aid the companies.

Meanwhile, as the industry players' business prospects are highly correlated with U.S. housing market conditions, improving residential construction markets are expected to drive growth. Builders are now cautiously optimistic for 2025 as the lack of existing inventory is shifting demand to the new home market, thereby driving the demand for companies' products in the industry.

Operational Excellence, Product Innovation & Acquisitions: The industry participants have been undertaking strong cost-saving initiatives like business consolidation, system implementations, plant/branch closures, improvement in the global supply chain and headcount reductions to boost profitability. Industry participants have also been strategically investing in new products, sales and support services, digitally enabled solutions and advanced manufacturing capabilities to boost revenues. The companies are also following a systematic acquisition strategy to supplement organic growth and expand access to additional markets and products.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Building Products – Miscellaneous industry is a 41-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #160, which places it in the bottom 36% of more than 250 Zacks industries.

The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry's positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group's earnings growth potential. Since August 2024, the industry's earnings estimates for 2024 have been revised downward to $4.80 from $4.87 per share.

Despite the industry's blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it's worth taking a look at the industry's shareholder returns and current valuation.

Industry Outperforms S&P 500 & Sector

The Zacks Building Products – Miscellaneous industry has outperformed the Zacks S&P 500 Composite and the broader Zacks Construction sector over the past year.

Over this period, the industry has rallied 47.6%, outperforming the broader sector's rise. Meanwhile, the Zacks S&P 500 Composite has jumped 31.5% over the same period.

Industry's Current Valuation

On the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing building products' stocks, the industry is trading at 17.4X versus the S&P 500's 21.7X and the sector's 17.8X.

Over the past five years, the industry has traded as high as 20.1X, as low as 11.2X and at a median of 16.6X.

5 Building Product Stocks to Keep an Eye On

We have selected five stocks from the Zacks universe of building products that have solid growth prospects.

Arcosa: This Dallas, TX-based company provides infrastructure-related products and solutions. The company remains focused on its long-term vision to lessen the complexity of Arcosa's overall portfolio and shift its business mix toward less cyclical, higher-margin growth opportunities that leverage core strengths and drive long-term shareholder value creation.

The company is benefiting from significant tailwinds in infrastructure and heavy manufacturing projects. Arcosa is well-positioned for a robust performance in 2024, supported by sustained momentum from infrastructure spending across its diverse range of businesses. With a favorable commercial landscape, the company maintains its focus on achieving operational excellence and enhancing profitability.

Arcosa, a Zacks Rank #1 (Strong Buy) stock, has gained 40.8% over the past year. ACA has seen an upward estimate revision of 5.9% for 2024 and 8.8% for 2025 earnings over the past 30 days to $3.60 per share and $4.82 per share. The estimated figure indicates 11.5% year-over-year growth for 2024 and 33.9% for 2025. The company's earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 39.8%. It currently holds a VGM Score of B. You can see the complete list of today's Zacks #1 Rank stocks here.

Armstrong World Industries: Based in Lancaster, PA, Armstrong World is a leading global manufacturer of ceiling systems primarily for commercial, institutional, and residential building construction and renovation. The company has been thriving by focusing on innovative products and pursuing strategic acquisitions to diversify its portfolio. Its recent acquisition of 3form, LLC is set to bolster the Architectural Specialties segment and strengthen connections with architects and designers.

Additionally, Armstrong World has been investing in digitalization and technological advancements. Since 2022, its digital initiative, Canopy, has shown consistent quarterly growth, generating new demand for its products. Furthermore, the company's recent investments in developing new products in metal, wood, and Tectum materials are contributing positively to its performance.

AWI, a Zacks Rank #2 (Buy) stock, has gained 79.2% over the past year. AWI has seen an upward estimate revision of 0.7% for 2024 and 0.6% for 2025 earnings over the past seven days to $6.11 per share and $6.74 per share, respectively. The company's earnings for 2024 and 2025 are expected to increase 14.9% and 10.3%, respectively. The company's earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 10.5%

Construction Partners: Headquartered in Dothan, AL, this civil infrastructure company engages in the construction and maintenance of roadways across Alabama, Florida, Georgia, North Carolina and South Carolina. The company has been benefiting from solid demand for infrastructure services across its geographic footprint of more than 70 local markets in the Southeast in both the private and public sectors, supported by increased funding for public projects at federal, state, and local levels, defying labor and inflation challenges.

Its recent acquisitions will help the company expand operations into fast-growing markets while maintaining its leverage ratio. Construction Partners' organic and inorganic growth opportunities in the attractive Southeastern U.S. Road construction/repair market are expected to help the company generate higher revenues.

ROAD, a Zacks Rank #3 (Hold) stock, has gained 96.6% over the past year. This company surpassed earnings estimates in all the trailing four quarters, with the average surprise being 35.1%. The estimated figures for fiscal 2024 and 2025 EPS will likely register 41.5% and 33.5%, respectively. Again, it carries an impressive VGM Score of B.

Frontdoor: Based in Memphis, TN, this company provides home warranties in the United States. The company is benefiting from its focus on new and innovative ways to boost demand for services, and the relaunch of American Home Shield brand is a significant component of this strategy. Looking ahead, the company is committed to establishing a solid foundation by investing in its brand and technology infrastructure and enhancing productivity throughout the organization.

FTDR, a Zacks Rank #3 stock, has gained 51% over the past year. The estimated figure indicates 21.3% and 4.5% year-over-year growth for 2024 and 2025, respectively. The company's earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 269%. It currently holds a VGM Score of A.

Latham Group: Based in Latham, NY, Latham Group, Inc. stands as the leading designer, manufacturer, and marketer of in-ground residential swimming pools and pool accessories across North America, Australia, and New Zealand. Despite difficult industry conditions, the company has been gaining from improved cost structures, production efficiencies, lean manufacturing, value engineering programs, and lower raw material costs. It remains focused on fiberglass pools, which offer cost, installation, and eco-friendly advantages over concrete pools.

The company has been expanding its product line and national dealer network, driving awareness and adoption. Meanwhile, the latest acquisition of Coverstar Central, Latham's long-time partner in automatic safety covers, is expected to enhance margins, accelerate sales growth, and strengthen relationships with pool builders, particularly for promoting fiberglass pools.

SWIM, a Zacks Rank #3 stock, has gained 161.5% over the past year. This company surpassed earnings estimates in the last reported quarter by 275%. The Zacks Consensus Estimate for 2024 and 2025 EPS indicates 750% and 30.8% growth, respectively. Again, it carries an impressive VGM Score of B.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

The Zacks Building Products - Miscellaneous industry has been facing headwinds due to a challenging real estate market and the effects of inflation on consumer sentiment. Nonetheless, increased government infrastructure spending is bolstering companies in the industry. Although potential challenges like macroeconomic uncertainties, new product investments and rising raw material costs could squeeze margins, firms such as Arcosa, Inc. ACA, Armstrong World Industries, Inc. AWI, Frontdoor, Inc. FTDR, Construction Partners, Inc. ROAD and Latham Group, Inc. SWIM stand to gain from operational excellence, geographic and product diversification strategies, strategic acquisitions, and higher infrastructure investments.

Industry Description

The Zacks Building Products - Miscellaneous industry primarily comprises manufacturers, designers and distributors of home improvement and building products like ceiling systems, doors, windows, flooring and metal products. Some industry players provide solutions to rehabilitate the aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries. The companies also manufacture expansion joints and structural bearings, ventilation products, ground-mounted solar racking and commercial greenhouses, as well as mail storage (solutions including mailboxes along with package delivery products). Companies in this industrial cohort also rent out equipment to a diverse customer base, including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities.

3 Trends Shaping the Future of the Building Products Industry

Rising Costs: Inflationary headwinds with respect to transportation costs, material costs and energy costs have been a pressing concern. Also, rising labor costs are compressing margins. These are dampening the companies’ operating performance. Although the industry participants have been working to recover higher costs through various price increases, they expect this ongoing volatility in material and transportation costs to be a concern. Apart from higher raw material costs, the companies bear expenses related to product launches. If companies are unable to offset these costs through price increases or supply-chain initiatives, their profits may be affected.

Also, the industry's outlook is closely tied to the U.S. housing and renovation markets. However, the challenging real estate environment, coupled with the effects of inflation on consumer confidence, has been weighing on industry players.

U.S. Administration’s Infrastructural Spending: The industry players are expected to benefit from strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply-chain investments. The U.S. administration’s endeavor to rebuild the nation’s deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to aid the companies. Meanwhile, as the industry players’ business prospects are highly correlated with U.S. housing market conditions, improving residential construction markets are expected to drive growth. Builders are now cautiously optimistic for 2025 as the lack of existing inventory is shifting demand to the new home market, thereby driving the demand for companies’ products in the industry.

Operational Excellence, Product Innovation & Acquisitions: The industry participants have been undertaking strong cost-saving initiatives like business consolidation, system implementations, plant/branch closures, improvement in the global supply chain and headcount reductions to boost profitability. Industry participants have also been strategically investing in new products, sales and support services, digitally enabled solutions and advanced manufacturing capabilities to boost revenues. The companies are also following a systematic acquisition strategy to supplement organic growth and expand access to additional markets and products.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Building Products – Miscellaneous industry is a 41-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #160, which places it in the bottom 36% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since August 2024, the industry’s earnings estimates for 2024 have been revised downward to $4.80 from $4.87 per share.

Despite the industry’s blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Outperforms S&P 500 & Sector

The Zacks Building Products – Miscellaneous industry has outperformed the Zacks S&P 500 Composite and the broader Zacks Construction sector over the past year.

Over this period, the industry has rallied 47.6%, outperforming the broader sector’s rise. Meanwhile, the Zacks S&P 500 Composite has jumped 31.5% over the same period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing building products’ stocks, the industry is trading at 17.4X versus the S&P 500’s 21.7X and the sector’s 17.8X.

Over the past five years, the industry has traded as high as 20.1X, as low as 11.2X and at a median of 16.6X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

5 Building Product Stocks to Keep an Eye On

We have selected five stocks from the Zacks universe of building products that have solid growth prospects.

Arcosa: This Dallas, TX-based company provides infrastructure-related products and solutions. The company remains focused on its long-term vision to lessen the complexity of Arcosa’s overall portfolio and shift its business mix toward less cyclical, higher-margin growth opportunities that leverage core strengths and drive long-term shareholder value creation. The company is benefiting from significant tailwinds in infrastructure and heavy manufacturing projects. Arcosa is well-positioned for a robust performance in 2024, supported by sustained momentum from infrastructure spending across its diverse range of businesses. With a favorable commercial landscape, the company maintains its focus on achieving operational excellence and enhancing profitability.

Arcosa, a Zacks Rank #1 (Strong Buy) stock, has gained 40.8% over the past year. ACA has seen an upward estimate revision of 5.9% for 2024 and 8.8% for 2025 earnings over the past 30 days to $3.60 per share and $4.82 per share. The estimated figure indicates 11.5% year-over-year growth for 2024 and 33.9% for 2025. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 39.8%. It currently holds a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: ACA