Construction Check: Highly Ranked Stocks to Buy Among the Blazing Sector

The construction space remains one of the strongest areas of the economy with the Zacks Construction sector currently holding the top spot out of 16 Zacks sectors.

With a combined total return (including dividends) of +28% YTD, the Zacks Construction sector has easily topped the S&P 500’s +16% and roughly matched the Nasdaq’s +30%.

Even with mortgage rates rising to multi-year highs at 7%, the backlog for homebuilders is high due to lingering demand from the pandemic. On top of that increased infrastructure spending in the U.S. economy has served as a further catalyst with projects in motion to maintain or build bridges and roads across the country.

That being said, monitoring stocks that can benefit from these construction-related activities is an intelligent investment idea. Here are three to consider that all boast a Zacks Rank #1 (Strong Buy).

Owens Corning OC: Staying on the strong buy list since early July, Owens Corning’s stock remains intriguing. As a worldwide leader in building materials systems and composite solutions, Owens stock has soared +59% in 2023.

Intriguingly, Owens stock still offers good value to investors even after this year’s extensive rally. Owens stock trades at just 10.7X forward earnings which is an attractive discount to the Zacks Building Products-Miscellaneous Industry average of 14.8X and the S&P 500’s 20.4X.

Furthermore, earnings estimates have soared over the last 30 days which is a strong indication there could be even more upside for OC shares. Owens is expecting steady growth with earnings now projected to be up 5% this year and rise another 2% in FY24 to $13.92 per share.

PulteGroup PHM: The trend of rising earnings estimates is compelling for PulteGroup’s stock as well with the company prospering as a home builder that offers financial services. PulteGroup was added to the Zacks Rank #1 (Strong Buy) list in late July and has skyrocketed +69% this year.

Notably, fiscal 2023 earnings estimates have leaped 16% in the last 30 days and have now soared 30% over the last quarter. The trend in FY24 earnings estimate revisions is similar making PulteGroup’s stock very compelling.

Annual earnings are now projected to jump 7% in FY23 and rise another 1% in FY24 to $11.71 per share. What is most intriguing about PulteGroup stock is its price-to-earnings valuation. At just 6.7X forward earnings, PulteGroup’s stock still trades slightly beneath its Building Products-Home Builders Industry average of 8.7X and at a very attractive discount to the benchmark.

Terex TEX: We will go outside the box for the last stock with Terex belonging to the Zacks Industrial Products sector but providing work platforms, materials, and machinery that are critical to construction activities.

Terex was added to the strong buy list in early August with it being noteworthy that its Manufacturing-Construction and Mining Industry is in the top 1% of over 250 Zacks industries.

Earnings estimates have climbed over the last 30 days with Terex’s EPS expected to skyrocket 58% in FY23 to $6.83 per share compared to $4.32 a share last year. Plus, FY24 earnings are expected to rise another 4%.

Trading at 8X forward earnings Terex stock offers a nice discount to the industry average of 13.4X and the benchmark. Furthermore, Terex stock is up +32% YTD which correlates with the strong performance of the Zacks Construction sector and has largely outperformed the Industrial Products sectors +6%.

Bottom Line

Rising earnings estimates indicate these construction-related stocks may continue their blazing price performances in 2023. More reassuring is that Owens Corning, PulteGroup, and Terex stock still offer good value to investors at their current levels and are viable investments for 2023 and beyond.
Terex Corporation (TEX): Free Stock Analysis Report

PulteGroup, Inc. (PHM): Free Stock Analysis Report

Owens Corning Inc (OC): Free Stock Analysis Report

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