After a turbulent 2020, the construction sector experienced stronger than expected growth in 2021. This trend is expected to continue, with construction spending is expected to increase by 2.7% in 2022.
While supply chain bottlenecks, labor shortages and volatility in material costs are concerns for the building products space, high demand for multi-family properties due to an increase in population and modular buildings is expected to drive the growth of the industry. In addition, the adoption of efficient technologies should improve the ability of companies in the construction products sector to obtain new projects and increase their profit margins.
As a result, major Builders FirstSource, Inc. construction products and equipment inventory (BLDR), Owen Corning (CO) and Simpson Manufacturing Co., Inc. (SSD) could be ideal choices for 2022.
FirstSource Builders, Inc. (BLDR)
BLDR is a supplier of structural building products, manufactured components and construction services to the professional new residential construction, repair and renovation market. The Company operates through four segments – North East; South East; South; and West. BLDR’s manufactured products include its factory-made roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, and engineered wood.
BLDR’s net sales increased 139.9% year-over-year to $5.51 billion in the third quarter ended September 30, 2021. The company’s gross margin increased 200.1% compared to the previous year’s value to reach $1.71 billion. Its operating income increased 499.2% from the year-ago quarter to $837.44 million. Additionally, the company’s net profit rose 613.5% year-over-year to $613.15 million.
Analysts expect BLDR’s fiscal 2021 revenue to be $19.55 billion, a year-over-year growth of 128.5%. The company has an impressive track record of earnings surprises; it has beaten consensus EPS estimates in each of the past four quarters. Additionally, its EPS is expected to grow 201% in the current year. Its share price is up 107% since the start of the year.
BLDR’s strong fundamentals are reflected in its POWR Rankings. The stock has an overall B rating, which equates to a buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
Also, the stock has a B rating for Momentum. We also rated BLDR for Sentiment, Value, Quality, Stability and Growth. Click here to access all BLDR ratings. BLDR is ranked #26 out of 61 stocks in the B rating Home improvement and goods industry.
Owen Corning (CO)
Incorporated in 1938, OC manufactures and markets a line of composite insulation, roofing and fiberglass materials in the United States, Canada, Europe, Asia-Pacific and internationally. Composite materials; Insulation; and Roofing are the segments in which the company operates.
In October, OC introduced “Bourbon” as the 2022 Shingle Color of the Year (SCOTY) and the newest color in the company’s TruDefinition Duration Designer Colors Collection shingle line. This new introduction should provide homeowners with performance products as they invest in improving their home.
During the third quarter ended September 30, 2021, OC net sales increased 16.2% year-over-year to $2.21 billion. The company’s gross margin increased 24.9% from the previous year’s value to $596 million. His operating result increased 34.2% from the prior year quarter to $392 million. Additionally, the company’s net income rose 25.7% year-over-year to $259 million.
OC revenue is expected to grow 5.4% year-over-year to $8.85 billion in fiscal 2022. It beat consensus EPS estimates in each of the last four quarters. In addition, its EPS is expected to increase by 68.5% in the current year. Additionally, the stock has gained 19.2% over the past year and 19% since the start of the year.
OC’s POWR ratings reflect this promising outlook. The stock has an overall B rating, which equates to a buy in our proprietary rating system. Also, the stock has a B rating for value, momentum and quality.
In addition to the POWR ratings I just highlighted, one can see OC’s ratings for Growth, Stability, and Sentiment here. The stock is ranked #14 out of 55 stocks in the B rating Industrial – Building Materials industry.
Simpson Manufacturing Co., Inc. (SSD)
SSD manufactures wood building products that provide connectors, truss plates, fastening systems, ties and shear walls, and concrete building products. The company also offers engineering and design services and software solutions that facilitate the specification, selection and use of its products. SSD markets its products in several countries, including the United States, Canada, France, United Kingdom, Germany, Denmark, Switzerland.
Net SSD sales for the third quarter ended September 30, 2021 increased 8.9% year-over-year to $396.74 million. The company’s gross profit rose 14.3% from the previous year’s value to $198.03 million. Its operating income rose 10.2% from the year-ago quarter to $100.62 million. Additionally, the company’s net profit rose 10% year-over-year to $73.78 million.
SSD revenue for fiscal 2022 is expected to be $1.8 billion, representing 17.8% year-over-year growth. The company has exceeded consensus EPS in three of the past four quarters. Its EPS is expected to increase 27.9% in the current year. The stock has jumped 32.1% in the past nine months and 47.8% in the past year.
It’s no surprise that the SSD has an overall rating of B, which equates to a buy in our POWR rating system. Also, the stock has an A rating for Quality and a B rating for Momentum.
Click here to see additional SSD POWR ratings (sentiment, stability, growth, and value). SSD is ranked #33 out of 92 stocks in the industrial equipment industry.
BLDR shares were trading at $84.91 per share on Wednesday afternoon, up $0.45 (+0.53%). Year-to-date, BLDR has gained 108.06%, compared to a 29.52% rise in the benchmark S&P 500 over the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After get a master’s degree in economics, her interest in financial markets motivated her to begin her career in investment research. Following…