The housing industry has been one of the best performers amid the pandemic. Ultra-low interest rates and increasing consumer interest in house purchases have been helping the industry grow significantly. The home sales index, which is based on contract signings, rose 8% to 114.7 in May 2021, representing the highest reading for this metric since May 2005. Also, contract signings increased 13.1% year-over-year. However, median home prices increased 23% year-over-year to a $361,750 record high for the four-week period ended June 20.
While COVID-19 pandemic related restrictions resulted in a supply shortage, a substantial rise in home-for-sale listings in June demonstrated a decent recovery. New listings increased 5.5% year-over-year, and 10.9% sequentially in June.
Because of these factors, the building materials industry is expected to grow substantially in the coming months as the demand for housing remains high. So, we think building material stocks Owens Corning (OC) and BlueLinx Holdings Inc. (BXC) are attractive investment bets now.
Owens Corning (OC)
OC markets building materials systems, delivering a range of products and services. The company operates primarily in three segments: Composites, Insulation, and Roofing. Toledo, Ohio-based OC has been listed as a Fortune 500 company for 66 consecutive years now.
On June 17, OC declared a $0.26 quarterly dividend per share of its common stock, payable August 6, 2021.
OC’s net sales increased 19.6% year-over-year to $1.92 billion in its fiscal first quarter, ended March 31. Its net earnings stood at $210 million, up 122.9% from the same period last year. Its operating income grew 134.3% from the year-ago value to $298 million. The company’s EPS increased 123.5% year-over-year to $1.98.
A $2.07 billion consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 14.4% increase year-over-year. The Street expects the company’s EPS to rise 30% from the prior year quarter to $2.21 in the current quarter. Furthermore, OC surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of OC have gained 73.6% over the past year, and 27.5% year-to-date.
OC has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OC has a grade of B for Growth, Value, and Quality. Among the 54 stocks in the A-rated Industrial – Building Materials industry, OC is ranked #3. Click here to view additional OC ratings for Momentum, Sentiment, and Stability.
BlueLinx Holdings Inc. (BXC)
BXC in Atlanta, Ga., is a distributor of residential and commercial building products. The company distributes products in primarily two categories, structural products and specialty products. It also offers a range of value-added services and solutions to its customers.
On April 5, BXC announced that it had repaid the approximately $16 million outstanding principal balance under its term loan facility, funded through existing availability under the company’s revolving credit facility.
BXC’s net sales increased 54.9% year-over-year to $1.03 billion in its fiscal first quarter, ended April 3. Its operating income grew 1,094.8% from its year-ago value to $99.53 million, while its net income improved 7,960.2% year-over-year to a record $61.86 million. The company’s EPS increased 7,950% year-over-year to $6.28.
Analysts expect BXC’s revenues to increase 20.2% year-over-year to $3.72 billion in the current year. A $14.22 consensus EPS estimate for the current year indicates a 66.3% rise from the last year. BXC has an impressive earnings surprise history as well; it beat the consensus EPS estimates in each of trailing four quarters. Shares of BXC have gained 436.7% over the past year to close yesterday’s trading session at $45.09.
It is no surprise that BXC has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The stock has a grade A for Growth and Value, and grade B for Momentum. It is ranked #12 in the Industrial – Building Materials industry. To see additional BXC ratings for Sentiment, Stability, and Quality, click here.
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OC shares were trading at $94.80 per share on Thursday afternoon, down $3.32 (-3.38%). Year-to-date, OC has gained 25.96%, versus a 15.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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