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.
Uncertainties in the macroeconomic landscape, weather-related issues, and increased labor costs pose challenges for the Zacks Building Products - Concrete & Aggregates industry. Nonetheless, an uptick in spending on infrastructure and public construction is set to continue driving growth in the industry. The industry is also poised to benefit from improvements in the single-family residential construction market and advantageous pricing dynamics amid difficult conditions. Companies like Vulcan Materials Co., Eagle Materials Inc. and Summit Materials, Inc. have been leveraging these favorable trends to their advantage.
Industry Description
The Zacks Building Products - Concrete & Aggregates industry consists of manufacturers, distributors and sellers of construction materials like aggregates and concrete along with other related items for public infrastructure, residential and non-residential, as well as other end markets. The materials also include gypsum wallboard, recycled paperboard, concrete blocks, ready-mix concrete, and oil and gas proppants. The industry players are also involved in designing, engineering, manufacturing, marketing, and installation of external building products for commercial, residential, and repair and remodel markets in domestic as well as international markets.
4 Trends Shaping the Future of Concrete & Aggregates Industry
Fed's Decision of Only One/Two Rate Cuts This Year: The Federal Reserve's decision to implement only one/two rate cuts this year likely means a relatively tight monetary policy stance. With the benchmark interest rate holding at 5.25%-5.50%, financing costs for infrastructure projects will remain elevated, potentially slowing down new constructions and expansions, thereby creating a cautious economic environment. Companies in this sector should prepare for these conditions by optimizing their operations, carefully planning capital expenditures, and closely monitoring economic indicators to adjust their strategies accordingly.
Fluctuation in Input Prices, Weather Woes & Shortage of Skilled Labors: The industry players are struggling with escalating material expenses, the shortage of skilled laborers and rising wage costs. The companies use electricity, diesel fuel, liquid asphalt and other petroleum-based resources. Hence, supply-related woes and significant fluctuations in the prices of these resources affect operating results.
Also, businesses are exposed to weather-related risks affecting production schedules and profitability. Excessive rainfall, flooding or severe droughts jeopardize shipments and production. The first and fourth quarters are affected mainly by winter. Again, hurricanes in the Atlantic Ocean and Gulf Coast are most active during these quarters. These impediments may bump up costs and mar the industry participants' profits.
Focus on Reviving Infrastructure: The Infrastructure Investment and Jobs Act, the Creating Helpful Incentives to Produce Semiconductors and Science Act, and the Inflation Reduction Act collectively signify a substantial commitment to bolstering American competitiveness. These three enacted laws are aimed at revitalizing American infrastructure, expediting the shift toward a sustainable economy, and fortifying the domestic semiconductor sector.
These bills comprise new investments in almost every infrastructure sector, including transportation, energy, broadband and water. The U.S. administration's endeavor to pump money for rebuilding the nation's roads, bridges and other infrastructure would give construction companies a solid foundation for growth.
Acquisitions & Focus on Operating Efficiency: The industry participants follow a well-chalked-out acquisition plan to enhance domestic and international portfolios. Moreover, companies are increasingly focusing on reducing controllable costs and maximizing operating efficiency across business lines to generate higher earnings and cash flows. The industry players have also been experiencing a solid pricing environment across their product portfolios, thereby helping to boost margins.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Building Products - Concrete & Aggregates industry is an eight-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #206, which places it in the bottom 18% 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 dull 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 June 2024, the industry's earnings estimates for 2024 have decreased 7.4% to $2.25 per share from $2.43.
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 Underperforms S&P 500 & Sector
The Zacks Building Products - Concrete & Aggregates industry has lagged the Zacks S&P 500 Composite and the broader Zacks Construction sector over the past year.
Stocks in this industry have collectively gained 7.4% versus the broader sector's rise of 32.8% over the past year. Meanwhile, the S&P 500 has gained 23.8% in the same period.
Concrete & Aggregates 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 - Concrete & Aggregates stocks, the industry is currently trading at 18.3X versus the S&P 500's 21.5X and the sector's 17.8X.
Over the past five years, the industry has traded as high as 24.5X, as low as 13.9X and at a median of 20X.
Eagle Materials: This Dallas, TX-based company produces and supplies heavy construction materials, light building materials and materials used for oil and natural gas extraction in the United States. Eagle Materials has benefited from a proactive maintenance strategy, effectively managing costs and ensuring smooth operations. It has also made significant strides in sustainability and key projects.
The Texas Lehigh slag grinding facility is nearing completion, promising both economic and environmental benefits. Additionally, the expansion and upgrade of the Mountain Cement facility will boost efficiency and support the company's sustainability goals. Eagle Materials' transition to Portland Limestone Cement and other blended products, now making up 90% of production, marks a major step in reducing CO2 emissions.
Investments in alternative fuel systems and reduced water usage at its paper mill further underscore its commitment to sustainability. The cement business outlook remains strong, driven by public infrastructure spending and non-residential construction projects, providing long-term visibility for the company.
Eagle Materials shares have surged 34.6% in the past year. Earnings for fiscal 2024 are expected to grow 12.9%. It also has a favorable VGM Score of A, making it a potentially interesting investment opportunity.
Vulcan Materials Company: This Birmingham, AL-based company produces and supplies construction aggregates, asphalt mix as well as ready-mixed concrete. The company's focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — should enhance price performance and operating efficiencies.
Vulcan Materials has been generating higher earnings on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives. Overall, improving single-family residential and private non-residential construction, large industrial project demand, solid infrastructure investment and favorable pricing dynamics should drive growth.
Shares of Vulcan have gained 10.6% in the past year. VMC surpassed earnings estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 2.5%. Earnings for 2024 are expected to rise 12.9%. It has a three-to-five-year expected EPS growth rate of 13.9%.
Summit Materials: Based in Denver, CO, this is a construction material company. Summit Materials has been witnessing solid pricing growth across all lines of business and expects the trend to continue in 2024. The company has also been optimizing its portfolio as it intends to shift toward a more materials-led portfolio.
Meanwhile, the company remains optimistic as it believes public markets are poised to experience robust and durable growth driven by well-funded state budgets and infrastructure funding. A solid state Department of Transportation budget flow will aid the company, which has been receiving more contracts associated with highways and related works.
Summit Materials shares have gained 6.4% in the past year. Also, earnings for 2024 are expected to rise 10.1%. SUM surpassed earnings estimates in all the trailing four quarters, with the average surprise being 19.3%. Earnings for 2024 are expected to rise 12.9%.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights Vulcan Materials, Eagle Materials and Summit Materials
For Immediate Release
Chicago, IL – September 3, 2024 – Today, Zacks Equity Research discusses Vulcan Materials Co. (VMC - Free Report) , Eagle Materials Inc. (EXP - Free Report) and Summit Materials, Inc. (SUM - Free Report) .
Industry: Building Products
Link: https://www.zacks.com/commentary/2329884/3-concrete-aggregates-industry-stocks-thriving-in-tough-times
Uncertainties in the macroeconomic landscape, weather-related issues, and increased labor costs pose challenges for the Zacks Building Products - Concrete & Aggregates industry. Nonetheless, an uptick in spending on infrastructure and public construction is set to continue driving growth in the industry. The industry is also poised to benefit from improvements in the single-family residential construction market and advantageous pricing dynamics amid difficult conditions. Companies like Vulcan Materials Co., Eagle Materials Inc. and Summit Materials, Inc. have been leveraging these favorable trends to their advantage.
Industry Description
The Zacks Building Products - Concrete & Aggregates industry consists of manufacturers, distributors and sellers of construction materials like aggregates and concrete along with other related items for public infrastructure, residential and non-residential, as well as other end markets. The materials also include gypsum wallboard, recycled paperboard, concrete blocks, ready-mix concrete, and oil and gas proppants. The industry players are also involved in designing, engineering, manufacturing, marketing, and installation of external building products for commercial, residential, and repair and remodel markets in domestic as well as international markets.
4 Trends Shaping the Future of Concrete & Aggregates Industry
Fed's Decision of Only One/Two Rate Cuts This Year: The Federal Reserve's decision to implement only one/two rate cuts this year likely means a relatively tight monetary policy stance. With the benchmark interest rate holding at 5.25%-5.50%, financing costs for infrastructure projects will remain elevated, potentially slowing down new constructions and expansions, thereby creating a cautious economic environment. Companies in this sector should prepare for these conditions by optimizing their operations, carefully planning capital expenditures, and closely monitoring economic indicators to adjust their strategies accordingly.
Fluctuation in Input Prices, Weather Woes & Shortage of Skilled Labors: The industry players are struggling with escalating material expenses, the shortage of skilled laborers and rising wage costs. The companies use electricity, diesel fuel, liquid asphalt and other petroleum-based resources. Hence, supply-related woes and significant fluctuations in the prices of these resources affect operating results.
Also, businesses are exposed to weather-related risks affecting production schedules and profitability. Excessive rainfall, flooding or severe droughts jeopardize shipments and production. The first and fourth quarters are affected mainly by winter. Again, hurricanes in the Atlantic Ocean and Gulf Coast are most active during these quarters. These impediments may bump up costs and mar the industry participants' profits.
Focus on Reviving Infrastructure: The Infrastructure Investment and Jobs Act, the Creating Helpful Incentives to Produce Semiconductors and Science Act, and the Inflation Reduction Act collectively signify a substantial commitment to bolstering American competitiveness. These three enacted laws are aimed at revitalizing American infrastructure, expediting the shift toward a sustainable economy, and fortifying the domestic semiconductor sector.
These bills comprise new investments in almost every infrastructure sector, including transportation, energy, broadband and water. The U.S. administration's endeavor to pump money for rebuilding the nation's roads, bridges and other infrastructure would give construction companies a solid foundation for growth.
Acquisitions & Focus on Operating Efficiency: The industry participants follow a well-chalked-out acquisition plan to enhance domestic and international portfolios. Moreover, companies are increasingly focusing on reducing controllable costs and maximizing operating efficiency across business lines to generate higher earnings and cash flows. The industry players have also been experiencing a solid pricing environment across their product portfolios, thereby helping to boost margins.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Building Products - Concrete & Aggregates industry is an eight-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #206, which places it in the bottom 18% 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 dull 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 June 2024, the industry's earnings estimates for 2024 have decreased 7.4% to $2.25 per share from $2.43.
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 Underperforms S&P 500 & Sector
The Zacks Building Products - Concrete & Aggregates industry has lagged the Zacks S&P 500 Composite and the broader Zacks Construction sector over the past year.
Stocks in this industry have collectively gained 7.4% versus the broader sector's rise of 32.8% over the past year. Meanwhile, the S&P 500 has gained 23.8% in the same period.
Concrete & Aggregates 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 - Concrete & Aggregates stocks, the industry is currently trading at 18.3X versus the S&P 500's 21.5X and the sector's 17.8X.
Over the past five years, the industry has traded as high as 24.5X, as low as 13.9X and at a median of 20X.
3 Concrete & Aggregates Stocks to Keep an Eye On
Below, we have discussed three stocks from the Zacks Concrete & Aggregates universe that have growth potential. The chosen companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Eagle Materials: This Dallas, TX-based company produces and supplies heavy construction materials, light building materials and materials used for oil and natural gas extraction in the United States. Eagle Materials has benefited from a proactive maintenance strategy, effectively managing costs and ensuring smooth operations. It has also made significant strides in sustainability and key projects.
The Texas Lehigh slag grinding facility is nearing completion, promising both economic and environmental benefits. Additionally, the expansion and upgrade of the Mountain Cement facility will boost efficiency and support the company's sustainability goals. Eagle Materials' transition to Portland Limestone Cement and other blended products, now making up 90% of production, marks a major step in reducing CO2 emissions.
Investments in alternative fuel systems and reduced water usage at its paper mill further underscore its commitment to sustainability. The cement business outlook remains strong, driven by public infrastructure spending and non-residential construction projects, providing long-term visibility for the company.
Eagle Materials shares have surged 34.6% in the past year. Earnings for fiscal 2024 are expected to grow 12.9%. It also has a favorable VGM Score of A, making it a potentially interesting investment opportunity.
Vulcan Materials Company: This Birmingham, AL-based company produces and supplies construction aggregates, asphalt mix as well as ready-mixed concrete. The company's focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — should enhance price performance and operating efficiencies.
Vulcan Materials has been generating higher earnings on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives. Overall, improving single-family residential and private non-residential construction, large industrial project demand, solid infrastructure investment and favorable pricing dynamics should drive growth.
Shares of Vulcan have gained 10.6% in the past year. VMC surpassed earnings estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 2.5%. Earnings for 2024 are expected to rise 12.9%. It has a three-to-five-year expected EPS growth rate of 13.9%.
Summit Materials: Based in Denver, CO, this is a construction material company. Summit Materials has been witnessing solid pricing growth across all lines of business and expects the trend to continue in 2024. The company has also been optimizing its portfolio as it intends to shift toward a more materials-led portfolio.
Meanwhile, the company remains optimistic as it believes public markets are poised to experience robust and durable growth driven by well-funded state budgets and infrastructure funding. A solid state Department of Transportation budget flow will aid the company, which has been receiving more contracts associated with highways and related works.
Summit Materials shares have gained 6.4% in the past year. Also, earnings for 2024 are expected to rise 10.1%. SUM surpassed earnings estimates in all the trailing four quarters, with the average surprise being 19.3%. Earnings for 2024 are expected to rise 12.9%.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
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.