We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Stocks to Watch in a Prospering Retail Building Products Industry
Read MoreHide Full Article
The Zacks Building Products – Retail industry is expected to continue benefiting from strong consumer demand trends for home renovation projects and maintenance activities as consumers continue to spend more time at home. The industry players are expected to gain from investments in digital and omni-channel capabilities for demand fulfillment, strategy executions and acquisitions. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Pro customers.
Continued innovation and e-commerce expansion, and strong demand are likely to benefit industry participants like The Home Depot Inc. (HD - Free Report) , Lowe’s Companies Inc. (LOW - Free Report) , Builders FirstSource, Inc. (BLDR - Free Report) , GMS Inc. (GMS - Free Report) and Tecnoglass (TGLS - Free Report) .
About the Industry
The Zacks Building Products – Retail industry mainly comprises U.S. home improvement retailers, manufacturers of industrial and construction materials, and distributors of wallboard and ceiling systems. Some industry participants offer products and services for home decoration, repair and remodeling, and in-home delivery and installation services. A few industry players provide construction products, ranging from cement or concrete foundation materials to roofing boards and shingles. The companies also sell lumber, insulation materials, drywall, plumbing fixtures, hard-surface flooring, and lawn and garden decor products. Some players also deal in threaded fastener products, and manufactured and natural stone tiles. In addition to general consumers, the industry players cater to professional builders, sub-contractors, remodelers and retailers.
3 Trends Shaping the Future of Building Products - Retail Industry
Adherence to Home Refurbishing Activities: With rising inflation, interest rates, and increased construction costs and home prices, consumers are inclined toward renovating their homes instead of buying new ones. Consumers continue to invest in making homes cozy and comfortable. Industry experts opine that consumers’ discretionary spending on homes will continue, as interests in keeping houses well-maintained are here to stay. Revamping interiors to facilitate work-from-home and entertainment needs continues to remain a major trend. Do-it-yourself (DIY) projects for decorating and maintaining furniture and fixtures are widely undertaken. There is a higher demand for gardening tools, as well as products related to at-home activities, such as paint and tool kits. This, along with rapid urbanization, should keep aiding the top-line performances of the industry participants. Additionally, consumers are open to hiring Professional (Pro) help to complete their home renovations, resulting in rising demand for Pro projects. This is likely to aid companies in the home improvement space, with a focus on building Pro offerings.
Digitization in Focus: Retail Building Products industry participants have been witnessing a surge in online business transactions, owing to consumers’ growing digital dependency. Companies have, therefore, been bolstering their digital presence by expanding the availability of online assortments and bolstering omni-channel capabilities. Such prudent measures have been aiding the companies to meet the accelerated demand. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Pro customers. The digital transaction boom should continue to drive the top lines of the key industry players.
Rising Costs: Some home improvement retailers have been incurring additional costs to provide enhanced payments and other employee benefits amid the pandemic. A few players have been witnessing inflationary pressure across product categories, as well as higher transportation costs. Such increased costs are likely to put pressure on margins. Nevertheless, companies are adopting prudent saving measures to cushion the impacts of such costs.
Zacks Industry Rank Indicates Solid Prospects
The Building Products – Retail industry is housed within the broader Zacks Retail-Wholesale sector. The industry currently carries a Zacks Industry Rank #54, which places it in the top 21% 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 bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current year have increased 12.3%.
Given the industry’s encouraging prospects, we present a few stocks that you may want to buy for your portfolio. But before that, it is worth taking a look at the industry’s stock-market performance and current valuation.
Industry Vs. Broader Market
The Zacks Building Products – Retail industry has outperformed the broader Zacks Retail-Wholesale sector but lagged the Zacks S&P 500 over the past year.
The industry declined 19.3% in the past year, whereas the broader sector declined 30.8%. Meanwhile, the S&P 500 has registered a fall of 17.2% in the past year.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is the commonly used multiple for valuing Retail-Wholesale stocks, the industry is currently trading at 16.01X compared with the S&P 500’s 17.5X. Further, the sector’s forward-12-month P/E stands at 21.31X.
Over the last five years, the industry traded as high as 23.43X and as low as 14.25X, with the median at 19.54X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Building Products Stocks to Buy
Tecnoglass: The Colombia-based company is a leading manufacturer of architectural glass, windows, and associated aluminum products, serving the global residential and commercial end markets. Tecnoglass has been gaining from its ability to capitalize on strong residential demand, investments in automation and capacity enhancements, and focus on execution. It has been delivering strong results for its single-family residential business, which has a shorter cash cycle.
Tecnoglass is poised to benefit from its business momentum, particularly strong single-family residential revenues. The Zacks Rank #1 (Strong Buy) company remains committed to leveraging its vertically integrated structure and innovative product development to boost shareholder value. The TGLS stock has declined 25.5% in a year. The Zacks Consensus Estimate for TGLS’ current fiscal-year sales and earnings indicates year-over-year growth of 40.5% and 76.4%, respectively. The consensus estimate for the current fiscal-year earnings has improved 19.5% in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: TGLS
GMS: The Tucker, GA-based leading North American specialty building product distributor has been gaining from robust customer service in a solid residential market, coupled with an inflationary pricing environment and successful platform expansion activities. Inflationary pricing, healthy residential end markets, strong performance from complementary products and the recent acquisitions have been sales drivers for GMS.
The Zacks Rank #2 (Buy) company has declined 13.6% in a year. The Zacks Consensus Estimate for GMS’ current fiscal year’s sales and earnings indicates year-over-year growth of 10.8% and 10.2%, respectively. The consensus estimate for current fiscal-year earnings has been unchanged in the past 30 days.
Price and Consensus: GMS
Home Depot: The Atlanta, GA-based company is the world’s largest home improvement specialty retailer based on net sales. Home Depot has been benefiting from strong demand for home improvement projects, robust housing market trends and ongoing investments. Continued strength in both Pro and DIY categories, and digital momentum have been key drivers. Its interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters, aiding digital sales.
Home Depot is witnessing significant benefits from the execution of its One Home Depot plan, which focuses on supply-chain expansion, technology investments and digital enhancements. The company has created the fastest, most efficient delivery network in home improvement through options like buy online pick up in store with convenient pickup lockers, buy online deliver from store with express car and van delivery, and curbside pickup. The Zacks Rank #3 stock has declined 20.9% in a year. The Zacks Consensus Estimate for HD’s current fiscal-year sales and earnings indicates year-over-year growth of 3.6% and 7.2%, respectively. The consensus estimate for current fiscal-year earnings has been unchanged in the past 30 days.
Price and Consensus: HD
Lowe’s Companies: The Mooresville, NC-based leading home improvements retailer has been gaining from strong growth in its Pro business. The company has been enhancing the experience of its pro customers by upgrading pro-focused brands and revamping the pro-service business website. The company also remains well-positioned to capitalize on the demand for home improvement, backed by investments in the technology and merchandise category. Gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative are likely to drive the company’s results in the near and long terms. The Total Home strategy has been resonating well with Pro and DIY customers for a while.
Lowe’s has been progressing well with advancements in the digital channel. The company is investing in enhancing omni-channel retailing capabilities. Management is also committed to enhancing its Pro offerings, expanding the company’s market share and driving the operating margin. Shares of the Zacks Rank #3 company have declined 15% in a year. The Zacks Consensus Estimate for LOW’s current fiscal year’s sales and earnings indicates year-over-year growth of 0.8% and 12.5%, respectively. The consensus estimate for current fiscal-year earnings has improved 0.1% in the past seven days.
Price and Consensus: LOW
Builders FirstSource: The Dallas, TX-based company manufactures and supplies building materials. The company has been benefiting from its focus on cost synergies, strategic acquisition, and robust demand from solid housing and repair and remodeling activities. Robust demand for single-family housing, R&R and other activities have been tailwinds for the company’s products and services. Builders FirstSource continues to invest in innovations and enhance digital solutions for its customers.
Acquisitions are important for Builders FirstSource’s growth strategy to supplement its organic growth and expand extensively across vast geographic boundaries. The company has been active on the acquisition front, which is supporting the top line. It is also focusing on cost-management practices. The Zacks Rank #3 (Hold) stock has declined 7.4% in a year. The Zacks Consensus Estimate for BLDR’s current fiscal-year sales and earnings indicates growth of 14.2% and 68.5%, respectively, from the prior-year period’s reported figures. The consensus estimate for the current fiscal-year earnings has moved up 10.5% in the past seven days.
Price and Consensus: BLDR
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Stocks to Watch in a Prospering Retail Building Products Industry
The Zacks Building Products – Retail industry is expected to continue benefiting from strong consumer demand trends for home renovation projects and maintenance activities as consumers continue to spend more time at home. The industry players are expected to gain from investments in digital and omni-channel capabilities for demand fulfillment, strategy executions and acquisitions. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Pro customers.
Continued innovation and e-commerce expansion, and strong demand are likely to benefit industry participants like The Home Depot Inc. (HD - Free Report) , Lowe’s Companies Inc. (LOW - Free Report) , Builders FirstSource, Inc. (BLDR - Free Report) , GMS Inc. (GMS - Free Report) and Tecnoglass (TGLS - Free Report) .
About the Industry
The Zacks Building Products – Retail industry mainly comprises U.S. home improvement retailers, manufacturers of industrial and construction materials, and distributors of wallboard and ceiling systems. Some industry participants offer products and services for home decoration, repair and remodeling, and in-home delivery and installation services. A few industry players provide construction products, ranging from cement or concrete foundation materials to roofing boards and shingles. The companies also sell lumber, insulation materials, drywall, plumbing fixtures, hard-surface flooring, and lawn and garden decor products. Some players also deal in threaded fastener products, and manufactured and natural stone tiles. In addition to general consumers, the industry players cater to professional builders, sub-contractors, remodelers and retailers.
3 Trends Shaping the Future of Building Products - Retail Industry
Adherence to Home Refurbishing Activities: With rising inflation, interest rates, and increased construction costs and home prices, consumers are inclined toward renovating their homes instead of buying new ones. Consumers continue to invest in making homes cozy and comfortable. Industry experts opine that consumers’ discretionary spending on homes will continue, as interests in keeping houses well-maintained are here to stay. Revamping interiors to facilitate work-from-home and entertainment needs continues to remain a major trend. Do-it-yourself (DIY) projects for decorating and maintaining furniture and fixtures are widely undertaken. There is a higher demand for gardening tools, as well as products related to at-home activities, such as paint and tool kits. This, along with rapid urbanization, should keep aiding the top-line performances of the industry participants. Additionally, consumers are open to hiring Professional (Pro) help to complete their home renovations, resulting in rising demand for Pro projects. This is likely to aid companies in the home improvement space, with a focus on building Pro offerings.
Digitization in Focus: Retail Building Products industry participants have been witnessing a surge in online business transactions, owing to consumers’ growing digital dependency. Companies have, therefore, been bolstering their digital presence by expanding the availability of online assortments and bolstering omni-channel capabilities. Such prudent measures have been aiding the companies to meet the accelerated demand. Companies are also ramping up their delivery operations in order to provide safe and swift services, especially to Pro customers. The digital transaction boom should continue to drive the top lines of the key industry players.
Rising Costs: Some home improvement retailers have been incurring additional costs to provide enhanced payments and other employee benefits amid the pandemic. A few players have been witnessing inflationary pressure across product categories, as well as higher transportation costs. Such increased costs are likely to put pressure on margins. Nevertheless, companies are adopting prudent saving measures to cushion the impacts of such costs.
Zacks Industry Rank Indicates Solid Prospects
The Building Products – Retail industry is housed within the broader Zacks Retail-Wholesale sector. The industry currently carries a Zacks Industry Rank #54, which places it in the top 21% 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 bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current year have increased 12.3%.
Given the industry’s encouraging prospects, we present a few stocks that you may want to buy for your portfolio. But before that, it is worth taking a look at the industry’s stock-market performance and current valuation.
Industry Vs. Broader Market
The Zacks Building Products – Retail industry has outperformed the broader Zacks Retail-Wholesale sector but lagged the Zacks S&P 500 over the past year.
The industry declined 19.3% in the past year, whereas the broader sector declined 30.8%. Meanwhile, the S&P 500 has registered a fall of 17.2% in the past year.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is the commonly used multiple for valuing Retail-Wholesale stocks, the industry is currently trading at 16.01X compared with the S&P 500’s 17.5X. Further, the sector’s forward-12-month P/E stands at 21.31X.
Over the last five years, the industry traded as high as 23.43X and as low as 14.25X, with the median at 19.54X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Building Products Stocks to Buy
Tecnoglass: The Colombia-based company is a leading manufacturer of architectural glass, windows, and associated aluminum products, serving the global residential and commercial end markets. Tecnoglass has been gaining from its ability to capitalize on strong residential demand, investments in automation and capacity enhancements, and focus on execution. It has been delivering strong results for its single-family residential business, which has a shorter cash cycle.
Tecnoglass is poised to benefit from its business momentum, particularly strong single-family residential revenues. The Zacks Rank #1 (Strong Buy) company remains committed to leveraging its vertically integrated structure and innovative product development to boost shareholder value. The TGLS stock has declined 25.5% in a year. The Zacks Consensus Estimate for TGLS’ current fiscal-year sales and earnings indicates year-over-year growth of 40.5% and 76.4%, respectively. The consensus estimate for the current fiscal-year earnings has improved 19.5% in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: TGLS
GMS: The Tucker, GA-based leading North American specialty building product distributor has been gaining from robust customer service in a solid residential market, coupled with an inflationary pricing environment and successful platform expansion activities. Inflationary pricing, healthy residential end markets, strong performance from complementary products and the recent acquisitions have been sales drivers for GMS.
The Zacks Rank #2 (Buy) company has declined 13.6% in a year. The Zacks Consensus Estimate for GMS’ current fiscal year’s sales and earnings indicates year-over-year growth of 10.8% and 10.2%, respectively. The consensus estimate for current fiscal-year earnings has been unchanged in the past 30 days.
Price and Consensus: GMS
Home Depot: The Atlanta, GA-based company is the world’s largest home improvement specialty retailer based on net sales. Home Depot has been benefiting from strong demand for home improvement projects, robust housing market trends and ongoing investments. Continued strength in both Pro and DIY categories, and digital momentum have been key drivers. Its interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters, aiding digital sales.
Home Depot is witnessing significant benefits from the execution of its One Home Depot plan, which focuses on supply-chain expansion, technology investments and digital enhancements. The company has created the fastest, most efficient delivery network in home improvement through options like buy online pick up in store with convenient pickup lockers, buy online deliver from store with express car and van delivery, and curbside pickup. The Zacks Rank #3 stock has declined 20.9% in a year. The Zacks Consensus Estimate for HD’s current fiscal-year sales and earnings indicates year-over-year growth of 3.6% and 7.2%, respectively. The consensus estimate for current fiscal-year earnings has been unchanged in the past 30 days.
Price and Consensus: HD
Lowe’s Companies: The Mooresville, NC-based leading home improvements retailer has been gaining from strong growth in its Pro business. The company has been enhancing the experience of its pro customers by upgrading pro-focused brands and revamping the pro-service business website. The company also remains well-positioned to capitalize on the demand for home improvement, backed by investments in the technology and merchandise category. Gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative are likely to drive the company’s results in the near and long terms. The Total Home strategy has been resonating well with Pro and DIY customers for a while.
Lowe’s has been progressing well with advancements in the digital channel. The company is investing in enhancing omni-channel retailing capabilities. Management is also committed to enhancing its Pro offerings, expanding the company’s market share and driving the operating margin. Shares of the Zacks Rank #3 company have declined 15% in a year. The Zacks Consensus Estimate for LOW’s current fiscal year’s sales and earnings indicates year-over-year growth of 0.8% and 12.5%, respectively. The consensus estimate for current fiscal-year earnings has improved 0.1% in the past seven days.
Price and Consensus: LOW
Builders FirstSource: The Dallas, TX-based company manufactures and supplies building materials. The company has been benefiting from its focus on cost synergies, strategic acquisition, and robust demand from solid housing and repair and remodeling activities. Robust demand for single-family housing, R&R and other activities have been tailwinds for the company’s products and services. Builders FirstSource continues to invest in innovations and enhance digital solutions for its customers.
Acquisitions are important for Builders FirstSource’s growth strategy to supplement its organic growth and expand extensively across vast geographic boundaries. The company has been active on the acquisition front, which is supporting the top line. It is also focusing on cost-management practices. The Zacks Rank #3 (Hold) stock has declined 7.4% in a year. The Zacks Consensus Estimate for BLDR’s current fiscal-year sales and earnings indicates growth of 14.2% and 68.5%, respectively, from the prior-year period’s reported figures. The consensus estimate for the current fiscal-year earnings has moved up 10.5% in the past seven days.
Price and Consensus: BLDR