Construction Stocks Earnings This Week: PHM, DHI, WSO, SHW

In spite of a feeble start to the year amid equity market volatility and global concerns, the construction sector seems to have recovered on the back of strong housing fundamentals. The spring/summer selling season in 2016 was better than the year-ago comparable season. The springtime weather generally boosts construction activity and traffic trends.

Last month, two homebuilders – Lennar Corporation (NYSE:LEN) and KB Home (NYSE:KBH) – reported better-than-expected, second-quarter results, beating estimates for both earnings and sales. Both the companies recorded a double-digit increase in home deliveries and new home orders driven by a successful spring selling season. However, both witnessed slower sales trends in the Houston market.

According to an earnings preview report, earnings for the construction sector are expected to rise 9.0% in Q2 while revenues are expected to increase 5.1%.

Positives like an improving economy, modest wage growth, low unemployment levels, low interest rates, positive consumer confidence and a tight supply situation raise optimism about the sector’s performance for the second half of 2016.

Increase in home construction activity not only benefits homebuilders but also spurs demand for homebuilding materials, home decoration products and other related businesses. This, in turn, enhances the growth prospects of companies manufacturing these products.

Four companies from the construction sector, PulteGroup, Inc. (NYSE:PHM) , D.R. Horton, Inc. (NYSE:DHI) , Watsco Inc. (NYSE:WSO) and The Sherwin-Williams Company (NYSE:SHW) are set to report their quarterly results later this week. Will these companies put up a decent performance? Let’s have a look at what might be in store for them.

PulteGroup

The Atlanta, GA, based homebuilder is due to report its second quarter results on Jul 21, before the opening bell.

Last quarter, it had posted a positive earnings surprise of 26.32%. However, the company missed estimates in two out of the past four quarters, resulting in an average negative surprise of 1.38%.

PULTE GROUP ONC Price and EPS Surprise

PULTE GROUP ONC Price and EPS Surprise | PULTE GROUP ONC Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 33 cents.

Pulte is likely to do well in the second and subsequent quarters, benefiting from steady demand trends, prudent land investments, focus on higher-return businesses and gains from the Wieland acquisition. (Read more: What’s in Store for PulteGroup this Earnings Season? ).

D.R. Horton

The Texas-based homebuilder posted a positive earnings surprise of 10.64% last quarter. The company surpassed estimates in three out of the past four quarters, resulting in an average positive surprise of 8.47%. D.R Horton is expected to report on Jul 21 before the opening bell.

D R HORTON INC Price and EPS Surprise

D R HORTON INC Price and EPS Surprise | D R HORTON INC Quote

The company has an Earnings ESP of -1.52% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 66 cents.

D.R. Horton’s order trends have been steady for the past few quarters, which is likely to continue in the soon-to-be reported quarter. After weak numbers in the first quarter, home closings increased 12% in the second. We expect the improved trend to continue in the third quarter, which coupled with continued pricing gains should result in higher home sales. (Read more: What's in the Cards for D.R. Horton's Q3 Earnings?).

The Sherwin-Williams Company

Sherwin-Williams is expected to report on July 21 before the opening bell. The coatings and paints company delivered a positive earnings surprise of 11.04% in the last quarter. Notably, Sherwin-Williams has beaten the Zacks Consensus Estimate in three of the trailing four quarters with an average beat of 5.84%.

SHERWIN WILLIAM Price and EPS Surprise

SHERWIN WILLIAM Price and EPS Surprise | SHERWIN WILLIAM Quote

The company has an Earnings ESP of -0.48% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at $4.17 per share.

Sherwin-Williams anticipates consolidated net sales in Q2 to increase by a low to mid single-digit percentage on a year-over-year basis. At this level, the company expects earnings in the band of $3.95–$4.15 per share for the second quarter compared with $3.77 per share earned in the year-ago period. (Read more: Can Sherwin-Williams' Q2 Earnings Pull a Surprise?).

Watsco

Watsco is expected to report on July 22 before the opening bell. The leading distributor of heating, ventilation and air conditioning equipment as well as related parts and supplies delivered a negative earnings surprise of 2.74% last quarter. The company reported negative earnings surprises in three out of the past four quarters with an average miss of 2.37%.

WATSCO INC Price and EPS Surprise

WATSCO INC Price and EPS Surprise | WATSCO INC Quote

The company has an Earnings ESP of -0.49% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at $2.03.

Stay Tuned! Check later on our full write-up on earnings releases of these stocks.