Building Product Stocks Earnings Slated For Jul 20: UFPI, URI

According to our earnings preview report, construction companies are scheduled to post a 9% year-over-year increase in earnings in Q2. The revenue projections are fairly optimistic with sales likely to increase 5.1% year over year. Despite volatility in the U.S. stock market, uncertainty surrounding the Fed rate hike, panic in the global financial markets triggered by the unexpected Brexit vote and volatile gasoline prices, the homebuilding market is gaining strength.

Moreover, strong job data for June is encouraging. The month reported an addition of 287,000 jobs in the market, the highest in eight months. With improved job prospects and historically low mortgage rates, more young adults are purchasing their own homes, which will eventually drive the top line in the homebuilding space. In addition, the home remodeling market is also picking up pace. These factors eventually lead to higher demand for building products.

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

On Jul 20, two leading building product companies are scheduled to report their second quarter 2016 results. Let us look at how these companies are placed ahead of their release.

Universal Forest Products Inc. (NASDAQ:UFPI)

Headquartered in Grand Rapids, MI, Universal Forest Products Inc. (UFPI) engineers, manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products.

Last quarter, Universal Forest Products posted a positive surprise of 9.20%. In fact, the earnings history of this building products company is rather impressive. Universal Forest Products surpassed estimates in the past four quarters, resulting in an average positive surprise of 10.25%. Earnings estimates have remained stable for 2016 and 2017 prior to the company's second-quarter 2016 earnings release.

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 $1.44.

Universal Forest Products seems well positioned to benefit from the recovering U.S. housing market in the soon-to-be reported quarter. Also, assets acquired in the last few quarters will boost the company's growth momentum, going forward.

United Rentals, Inc. (NYSE:URI)

Headquartered in Stamford, CT, United Rentals is an equipment rental company. The company will report tomorrow after markets close.

Last quarter, United Rentals posted a positive surprise of 17.65%. The company has surpassed estimates in three out of the past four quarters and has an average positive surprise of 6.69%. However, estimates for 2016 and 2017 have gone down slightly prior to the company's second-quarter 2016 earnings release.

The company has an Earnings ESP of +3.80% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at $1.84.

Conclusion

With the rise in demand for homes and an improving job market in 2016, construction companies such as the ones discussed above are expected to witness strong demand for their products. Despite the obvious headwinds, there is a strong possibility that these companies will continue to perform well in the near term.

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