With infrastructure nationwide—such as power grids, public transportation and high-speed internet access—in need of maintenance, repair and reconstruction, the industry has enjoyed heightened investor attention over the past few months with the reopening of the economy. This is evident in the Global X U.S. Infrastructure Development ETF’s (PAVE) and the iShares U.S. Infrastructure ETF’s (IFRA) 20.7% and 16.6% returns, respectively, so far this year.
Further, the industry received a boost last month when President Biden reached an agreement with a bipartisan group of U.S. senators on a $1.2 trillion infrastructure spending proposal. So, the industry should remain in focus as the Senate works to pass the bill.
Given this backdrop, we think it could be wise to bet on fundamentally sound infrastructure stocks Owens Corning (OC), Louisiana-Pacific Corporation (LPX), Apogee Enterprises, Inc. (APOG), Quanex Building Products Corporation (NX), and BlueLinx Holdings Inc. (BXC). They each have plenty of upside to deliver.
Click here to check out our Infrastructure Sector Report for 2021
Owens Corning (OC)
OC is engaged in the development, manufacture, and marketing of insulation, roofing and fiberglass composites. The Toledo, Ohio company operates through three segments: Composites, Insulation and Roofing. It serves several industries, including the automotive, chemical, rubber, and construction industries.
The company is scheduled to announce its second quarter earnings results on July 28. OC’s $1.92 billion in net sales for the first quarter, ended March 31, 2021, represents a 19.6% year-over-year rise. The company’s net income came in at $210 million compared to a $917 million loss in the prior-year quarter. Its adjusted EPS came in at $1.73, up 179% year-over-year.
For the quarter ending September 30, 2021, analysts expect OC’s EPS and revenue to increase 30% and 14.4%, respectively, year-over-year to $2.21 and $2.07 billion. Moreover, it surpassed consensus EPS estimates in each of the trailing four quarters.
On July 13, 2021, OC completed the acquisition of vliepa GmbH, which specializes in the coating, printing and finishing of nonwovens, paper and film for the building materials industry. This move is expected to help OC expand its global nonwovens portfolio to better serve European customers and accelerate the growth of building and construction market applications in the region. The stock has gained 23.8% so far this year to close yesterday’s trading session at $93.75. Analysts expect the stock to hit $109.75 in the near term, which indicates a potential 17.1% upside..
It’s no surprise that OC has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth, Value, and Quality. Click here to see OC’s ratings for Momentum, Sentiment, and Stability as well. OC is ranked #5 of 54 stocks in the A-rated Industrial-Building Materials industry.
Louisiana-Pacific Corporation (LPX)
Building product manufacturer LPX’s products are used in home construction, repair and remodeling, and outdoor structures. The company operates in four segments: North America Oriented Strand Board (OSB); Siding; Engineered Wood Products (EWP); and South America. LPX is based in Nashville, Tenn.
LPX’s net sales increased 73.8% year-over-year to $1.02 billion for the first quarter ended March 31, 2021. The company’s gross profit for the quarter came in at $479 million, which represents a 343.5% year-over-year rise. Its adjusted net income increased 742.1% year-over-year to $320 million. LPX’s adjusted EPS came in at $3.01, up 785.3% year-over-year.
The company’s EPS and revenue are expected to increase 188.9% and 47.2%, respectively, year-over-year to $12.45 and $4.10 billion in its fiscal year 2021. LPX surpassed the consensus EPS estimates in each of the trailing four quarters.
Brad Southern, LPX’s CEO, said on May 4, “LP’s operations, procurement, and logistics teams overcame supply chain challenges as well as extreme winter weather in the southeast to deliver outstanding results. Capacity expansion projects are underway at Houlton and Peace Valley to meet strong and growing demand for innovative SmartSide and Structural Solutions products.”
The stock has rallied 48.3% over the past six months to close yesterday’s trading session at $56.97. It is expected to hit $81 in the near term, which indicates a potential 42.2% upside.
LPX has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Growth and Momentum. Click here to see the additional POWR Ratings for LPX (Sentiment, Value, and Stability). LPX is ranked #23 in the Industrial-Building Materials industry.
Apogee Enterprises, Inc. (APOG)
Operating for more than seven decades, Minneapolis, Minn.-based APOG designs and develops glass solutions for enclosing commercial buildings and framing art. Most of its revenues are derived from its architectural glass, framing systems, and installation services businesses. The company operates in four segments: Architectural Framing Systems, Architectural Glass, Architectural Services, and Large-Scale Optical Technologies (LSO).
For its fiscal first quarter, ended May 29, 2021, APOG’s net sales were $326 million, representing a 12.8% year-over year rise. The company’s sales from its LSO segment increased 283.8% year-over-year to $24.23 million, and its sales from its architectural services segment came in at $75.66 million, up 19% year-over-year. Its adjusted net earnings increased 176.6% from the same period last year to $10.82. And its adjusted EPS was $0.42, which represents a 180% year-over-year rise.
APOG’s $2.84 consensus EPS estimate for its fiscal year 2023 represents a 24.6% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 3.6% year-over-year to $1.27 billion in 2022.
The company has declared a $0.20 per share quarterly cash dividend, payable on July 29. APOG has been paying dividends for the past 31 years. This reflects its solid financial strength. The stock has gained 68.9% over the past year to close yesterday’s trading session at $37.84. Analysts expect the stock to hit $41.50 in the near term, which indicates a potential 9.7% upside.
APOG’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value and Quality. Click here to see the additional POWR Ratings for APOG (Stability, Sentiment, Growth, and Momentum). APOG is ranked #18 in the Industrial – Building Materials industry.
Quanex Building Products Corporation (NX)
NX not only provides components for the fenestration industry worldwide, but also provides various non-fenestration components and products that include solar panel sealants, fencing, water retention barriers, and conservatory roof components. It operates through three segments: North American Engineered Components; European Engineered Components; and North American Cabinet Components. NX is based in Houston, Tex.
The company’s $270.36 million in net sales for its fiscal second quarter, ended April 30, 2021, represents a 44.2% year-over-year rise. NX’s operating income for the quarter came in at $21.38 million, representing a 140.4% year-over-year rise. Its adjusted net income increased 127.7% year-over-year to $14.55 million, and its adjusted EPS increased 126.3% year-over-year to $0.43.
Analysts expect NX’s EPS and revenue to increase 39.5% and 23.3%, respectively, year-over-year to $1.73 and $1.05 billion in its fiscal year 2021. It surpassed consensus EPS estimates in each of the trailing four quarters.
On June 3, 2021, NX’s CEO George Wilson said, “Despite inflationary headwinds and labor challenges, we remain optimistic on the global economic outlook and overall trends within the residential housing industry. Our business is performing well, and we are confident in our ability to continue creating value for shareholders.”
The stock has rallied 76% over the past year to close yesterday’s trading session at $23.90. Analysts expect the stock to hit $34.33 in the near term, which indicates a potential 43.6% upside.
NX has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Quality. Click here to see the additional POWR Ratings for NX (Momentum, Sentiment, Growth, and Stability). NX is ranked #6 in the Industrial-Building Materials industry.
BlueLinx Holdings Inc. (BXC)
Building products distributor BXC, in Atlanta, Ga., operates its distribution business through a network of roughly 40 distribution centers. The company distributes structural products that include plywood and oriented strand board, and specialty products such as engineered wood, molding, and siding and trim.
BXC’s net sales increased 54.9% year-over-year to $1.03 billion for its fiscal first quarter, ended April 3, 2021. The company’s adjusted EBITDA increased 436.3% year-over-year to $106.56 million. Its net income came in at $61.86 million compared to a $787,000 loss in the year-ago period, and its EPS came in at $6.28 compared to a $0.08 loss in the prior-year quarter.
The company’s EPS and revenue are expected to increase 66.3% and 20.2%, respectively, year-over-year to $14.22 and $3.72.in its fiscal year 2021. Also, BXC surpassed consensus EPS estimates in each of the trailing four quarters.
In April 2021, BXC announced that it had repaid the approximately $16 million outstanding principal balance under its term loan facility. This loan repayment reduced the company’s cash interest expense and further simplified its capital structure. The stock has rallied 365.3% over the past year to close yesterday’s trading session at $39.13. It is expected to hit $80 in the near term, which indicates a potential 104.4% upside.
BXC’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Growth and Value, and a B grade for Momentum. Click here to see more of BXC’s component grades. BXC is ranked #14 in the Industrial-Building Materials Industry.
Click here to check out our Infrastructure Sector Report for 2021
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OC shares were trading at $94.05 per share on Thursday morning, up $0.30 (+0.32%). Year-to-date, OC has gained 24.97%, versus a 17.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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