3 Construction Stocks To Buy As U.S. Building Heats Up

After a strong 2017 for the construction industry and most signs pointing to continued growth, it might be a great time to jump on some construction and homebuilding industry stocks.

Three-quarters of U.S. construction firms plan to increase their payrolls in 2018, according to a new survey from the Associated General Contractors of America. Last year, the construction industry added 210,000 new jobs, which marked a 35% year-over-year jump, according to the Bureau of Labor Statistics. Spending climbed in the real estate sector, commercial and residential industry and in private construction projects.

“Construction firms appear to be very optimistic about 2018 as they expect demand for all types of construction services to continue to expand,” Associated General Contractors of America CEO Stephen E. Sandherr said in a statement.

“This optimism is likely based on current economic conditions, an increasingly business-friendly regulatory environment and expectations the Trump administration will boost infrastructure investments.”

With that said, let’s take a look at three construction stocks that investors might want to scoop up before the spring-time building boom really picks up.

1. Fastenal Company (NASDAQ:FAST)

Last week, this industrial and construction supply wholesale giant posted Q4 sales that climbed 14.8% year-over-year. Fastenal’s strong fourth-quarter helped its shares climb to a new all-time high of $56.73 per share on Wednesday. However, it doesn’t seem like the company will have a hard time breaking into a new range as its growth is expected to continue.

Looking ahead to the first quarter of 2018, Fastenal is projected to see its revenues surge 10.63% to hit $1.16 billion, based on our current Zacks Consensus Estimates. Earnings are expected to jump by 30.43% in the quarter. Fastenal is currently a Zacks Rank #2 (Buy) and sports “A” grades for both Growth and Momentum in our Styles Scores system.

On top of all of this, the company has earned six upward earnings estimate revisions against no downgrades for its current quarter, against no downgrades, all within the last 60 days. During this same time period, Fastenal earned a nine to zero ratio for its full year, as it seems analysts are indeed projecting a big year for this construction industry firm.

2. Caterpillar (NYSE:CAT)

Shares of this construction industry titan are currently hovering around their all-time high as investors anticipate strong fourth-quarter results from CAT, which is set to report Q4 earnings Thursday morning before the opening bell.

Caterpillar is expected to see its Q4 EPS skyrocket 113% to hit $1.77, while its sales are projected to pop by 24%, based on current Zacks Consensus Estimates. These estimates take into account the massive construction industry gains at the close of 2017 that saw total construction spending hit a record $1.257 trillion in November, according to the Commerce Department. If these estimates are topped or matched—which CAT has done in 15 of the last 16 quarters, including the trailing 11 periods—shares of the construction icon are likely to fly into a new range.

CAT is currently a Zacks Rank #2 (Buy) and looks poised to benefit from the 2018 construction industry expansion.

3. Deere & Company (NYSE:DE)

Shares of this manufacturing and construction equipment firm have soared 26.93% in the last 12 weeks and currently rest just below their all-time high. Deere’s recent climb comes after the company posted strong Q4 results in late November. Looking ahead, investors should note that 2018 is projected to be another great year for Deere.

Within the last 60 days, Deere has earned eight upward earnings estimate revisions for its current full-year against no downgrades. What’s more, the company has topped or matched earnings estimates every quarter for the last four years.

Deere is currently a Zacks Rank #1 (Strong Buy) and rocks an overall “B” VGM score, supported by “B” grades for Value and Momentum in our Style Scores system. In its upcoming quarter, Deere is projected to see its earnings reach $1.13 per share, which would mark an 85.25% year-over-year jump. On top of this EPS growth projection, Deere’s sales are expected surge over 36% to reach $6.40 billion.

Looking even further down the road, the company is expected to see both its top and bottom-line grow by over 22% during its full fiscal 2018—and these might only go up if the U.S. construction industry expansion predictions prove true.

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