Mixed Earnings Expected for Construction Sector in Q4 2024

Mixed Earnings Expected: The construction sector is set to report mixed earnings for Q4 2024, with infrastructure spending boosting some companies while others face increased costs and margin pressures.

Date: 29-01-2025

AI Rating: 5

Mixed Earnings Outlook
The analysis presents a mixed outlook for the construction sector's earnings in the fourth quarter of 2024. Factors such as increased infrastructure spending and strong housing demand could positively impact certain companies, while rising labor costs, high interest rates, and supply chain issues may negatively influence profitability.

Earnings Per Share (EPS)
The report states that half of the firms have beaten earnings estimates, indicating a potential strength in some companies' profitability. Specifically, Louisiana-Pacific Corporation topped EPS estimates for four consecutive quarters, with an average surprise of 30.7%. The Zacks Consensus Estimate for Louisiana-Pacific's EPS is projected at 74 cents, suggesting a growth rate of 4.2% year-over-year. On the other hand, Trex Company faces a decline in EPS projections, expected to drop to 5 cents, which is a 75% reduction from last year's earnings.

Revenue Trends
For the sector, an overall revenue growth of 0.4% is expected for Q4, indicating a deceleration compared to previous quarters. Specific companies like A may potentially outperform, while others may struggle due to external pressures on revenue streams.

Margin Pressures
The analysis highlights concerns over margin pressures, particularly for residential construction owing to the high costs associated with land development and mortgage rates near 7%. Margin compression is a growing concern as companies resort to price incentives to maintain demand, further impacting profitability.

Construction Companies at Risk and in Favor
Companies such as Louisiana-Pacific, Trex, Sterling Infrastructure, PulteGroup, and Weyerhaeuser appear actively involved in navigating the expected mixed earnings. Each of these firms has a varying degree of EPS performance potential based on their operational challenges and market conditions.

Stocks: LPX TREX STRL PHM WY