When it comes to housing, the markets are still bearish. Interest rates are still high, and players wait for an early rate cut before moving. With 30-year mortgage rates below 7%, it’s no coincidence that builders’ sentiments are still down. However, according to the National Association for Home Builders, recent macroeconomic data still points to improving conditions for home construction. If the NAHB is right, now could be a great time to buy into construction stocks before the bullish sentiment kicks in.
“Buy low, sell high” is easier said than done – or is it? Some may argue this may be too early, but holding companies with upside potential (i.e., before a turnaround on the overall sentiment) is beneficial if you plan to deploy capital and gain exposure in this sector. Let’s have a closer look at these construction-related stocks.
Apogee Enterprises (APOG)
Apogee Enterprises (NASDAQ:APOG) is a construction supplies company specializing in building enclosures, acrylic products, and performance glass products and services. Its offerings include framing systems, glass, and large-scale optimal technologies via its architectural framing systems segment; glass coating and glass fabrication via its architectural glass segment; project management and field installation under its architectural services; and fine art, custom framing, engineering optics, and glazing products under its LSO segment.
APOG recently announced it will release it’s third quarter of 2024 FY results on December 21, 2023. Looking at its latest earnings report, the company had a strong second quarter with an operating margin of 11.5% YoY and adjusted diluted EPS growing 28% YoY. Architectural Glass also experienced growth, with net sales increasing by 21.6% due to the increase in volume and emphasis on its premium offerings.
Looking ahead, the company raised its full-year outlook for diluted EPS, highlighting its strong performance. With a strong outlook, a promising growth trajectory, and a focus on high-value products, APOG could be one of the most promising construction stocks to buy.
Gibraltar Industries (ROCK)
Gibraltar Industries (NASDAQ:ROCK) is a construction supplies manufacturer and provider of products & services for sectors like renewable energy, residential, agtech, and infrastructure. The company’s operations include designing and installing solar racking and electrical balance of systems via its Renewables segment; ventilation, retractable awnings, ventilation products, etc., for its Residential segment; designing and constructing greenhouses for its Agtech segment; bridges, airfields, and high solutions for Infrastructures segment.
ROCK had a solid third quarter with an impressive 23.2% growth in adjusted EPS and 19% growth in operating income across its Renewables, Residential, Agtech, and Infrastructure segments. Its focus is on driving the quality of earnings through its strategic initiatives like cost management and acquisitions, which paid off with the results of its EPS and free cash flow increase.
The company has also highlighted how its current performance has increased its order backlogs by over 5% YoY, which puts it in a strong position to end with solid full-year results.
If that’s not enough, Gibraltar Industries has also upgraded its earnings guidance based on its improved profitability and bullish outlook. This strong management initiative and great results made ROCK one of our top construction stocks to buy before the year ends.
MasterBrand (MBC)
MasterBrand (NYSE:MBC) is a construction supplies company specializing in residential cabinets. Its products include cabinet materials for the bathroom, kitchen, and other parts of the home. The cabinet’s designs and finishes vary from stock to premium cabinetry, including brands like Homecrest, Kemper, Diamond, and others. The company has roughly 48 manufacturing facilities alongside various warehouse and distribution centers across North America. MBC has been recently recognized as one of the safest companies to work in America, according to EHS Today, highlighting the company’s strong commitment to employee safety and the work environment.
While MasterBrand reported a decrease in net sales, Q3’23 ended with net income increasing 14.4% YoY, and an adjusted EBITDA margin of 16.2%. Despite the soft demand for housing, MBC had a surge in its gross profit margin due to cost mitigations. Further, MasterBrand reported strong free and operating cash flow, highlighting its solid financial stability.
The company increased its guidance to a higher full-year adjusted EBITDA and margin outlook for the fiscal year. This strong performance and confidence in its full-year financials make MBC one of the promising construction companies to buy. Indeed, the company’s disciplined approach to its “The MasterBrand Way” has helped MBC improve its margins and is well-positioned for future expansion.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
