TREX Strengthens Partnership With Boise Cascade, Expands Reach

For those looking to find strong Construction stocks, it is prudent to search for companies in the group that are outperforming their peers. Is Comfort Systems (FIX) one of those stocks right now? Let's take a closer look at the stock's year-to-date performance to find out.

Comfort Systems is one of 88 companies in the Construction group. The Construction group currently sits at #8 within the Zacks Sector Rank. The Zacks Sector Rank includes 16 different groups and is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors.

The Zacks Rank is a proven model that highlights a variety of stocks with the right characteristics to outperform the market over the next one to three months. The system emphasizes earnings estimate revisions and favors companies with improving earnings outlooks. Comfort Systems is currently sporting a Zacks Rank of #1 (Strong Buy).

Within the past quarter, the Zacks Consensus Estimate for FIX's full-year earnings has moved 0.7% higher. This is a sign of improving analyst sentiment and a positive earnings outlook trend.

According to our latest data, FIX has moved about 117% on a year-to-date basis. At the same time, Construction stocks have gained an average of 25.7%. This means that Comfort Systems is performing better than its sector in terms of year-to-date returns.

Sterling Infrastructure (STRL) is another Construction stock that has outperformed the sector so far this year. Since the beginning of the year, the stock has returned 112.3%.

In Sterling Infrastructure's case, the consensus EPS estimate for the current year increased 5.4% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

Breaking things down more, Comfort Systems is a member of the Building Products - Air Conditioner and Heating industry, which includes 5 individual companies and currently sits at #32 in the Zacks Industry Rank. Stocks in this group have gained about 56.1% so far this year, so FIX is performing better this group in terms of year-to-date returns.

On the other hand, Sterling Infrastructure belongs to the Engineering - R and D Services industry. This 18-stock industry is currently ranked #154. The industry has moved +16% year to date.

Comfort Systems and Sterling Infrastructure could continue their solid performance, so investors interested in Construction stocks should continue to pay close attention to these stocks.

Zacks Investment Research

Johnson Controls International plc JCI has upgraded the Artificial Intelligence (AI) capabilities in its OpenBlue Enterprise Manager suite (part of the OpenBlue digital ecosystem). These updates feature the first generative AI applications for customers, improved building controls and a better user experience.

The OpenBlue digital ecosystem is a suite of interconnected smart building solutions to improve the performance, efficiency and sustainability of buildings. It leverages cutting-edge technologies such as Internet of Things (IoT), AI, data analytics and cloud computing to optimize building operations.

The new AI features include energy-saving tools, personalized user experiences, enhanced data insights for managing building visitors, improved monitoring of indoor air quality and automatic adjustments based on system issues. It enhances data insights, leveraging the benefits customers are already experiencing with OpenBlue.

With the help of OpenBlue Enterprise Manager, equipment upgrades and proactive services, businesses are saving a maximum of 30% on energy and 20% on maintenance and optimizing space by 10%. This improves efficiency, reduces costs and helps both the environment and the bottom line. The system now supports more than 130 types of energy-saving projects and has automated building control features.

JCI’s Zacks Rank

JCI currently carries a Zacks Rank #4 (Sell). In the past year, the company’s shares have gained 65.3% compared with the industry’s 29.8% growth.

The company is experiencing weakness across its Building Solutions Asia Pacific segment. Also, the escalating cost of sales poses a threat to Johnson Controls’ bottom line. Increased material cost inflation is pushing up its cost of sales.

Stocks to Consider

Some better-ranked companies are discussed below.

Louisiana-Pacific Corporation LPX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LPX delivered a trailing four-quarter average earnings surprise of 30.7%. In the past 60 days, the Zacks Consensus Estimate for Louisiana-Pacific’s 2024 earnings has increased 9.9%.

PotlatchDeltic Corporation PCH presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 50%.

In the past 60 days, the consensus estimate for PCH’s 2024 earnings has increased more than 100%.

RBC Bearings Incorporated RBC currently carries a Zacks Rank of 2. RBC delivered a trailing four-quarter average earnings surprise of 2.5%.

In the past 60 days, the consensus estimate for RBC Bearings’ fiscal 2025 earnings has increased 2.3%.

Zacks Investment Research

The SPDR Portfolio S&P 400 Mid Cap ETF (SPMD) was launched on 11/08/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Blend segment of the US equity market.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $12.27 billion, making it one of the larger ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.03%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.32%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 22.80% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Illumina Inc (ILMN) accounts for about 0.77% of total assets, followed by Carlisle Cos Inc (CSL) and Emcor Group Inc (EME).

The top 10 holdings account for about 6.49% of total assets under management.

Performance and Risk

SPMD seeks to match the performance of the S&P 1000 Index before fees and expenses. The S&P MidCap 400 Index combines the S&P MidCap 400 and the S&P SmallCap 600 to form an investable benchmark for the mid to small cap segment of the U.S. equity market.

The ETF has gained about 19% so far this year and is up roughly 36.12% in the last one year (as of 11/14/2024). In the past 52-week period, it has traded between $44.13 and $58.34.

The ETF has a beta of 1.10 and standard deviation of 20.23% for the trailing three-year period. With about 403 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR Portfolio S&P 400 Mid Cap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SPMD is a sufficient option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap ETF (VO) and the iShares Core S&P Mid-Cap ETF (IJH) track a similar index. While Vanguard Mid-Cap ETF has $74.22 billion in assets, iShares Core S&P Mid-Cap ETF has $97.33 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Emcor Group (EME), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Emcor Group currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for EME that show why this construction and maintenance company shows promise as a solid momentum pick.

Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For EME, shares are up 13.45% over the past week while the Zacks Building Products - Heavy Construction industry is up 8.55% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 15.55% compares favorably with the industry's 8.82% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Emcor Group have risen 39.96%, and are up 136.26% in the last year. In comparison, the S&P 500 has only moved 12.29% and 37.16%, respectively.

Investors should also pay attention to EME's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. EME is currently averaging 408,816 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with EME.

Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions helped boost EME's consensus estimate, increasing from $19.50 to $20.75 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that EME is a #1 (Strong Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Emcor Group on your short list.

Zacks Investment Research