Peek Into Construction Earnings Early Next Week: RPM, LII

So far, we have seen Q2 results from only 15.4% of the construction companies in the S&P 500 cohort. Prominent construction companies like KB Home (NYSE:KBH) , Lennar Corp. (NYSE:LEN) and United Rentals, Inc. (NYSE:URI) kick off the earnings season with both its top and bottom lines beating estimates.

Investor sentiment seems to be quite high at the start of the second-quarter reporting cycle, given the solid earnings outlook and favorable construction sector’s fundamentals. Per the latest Earnings Trends, 100% companies posted earnings as well as revenue beat. Although total earnings of these construction companies have decreased by a meager 0.7% so far, its revenues have increased 15.5%.

Overall, construction companies seem to be on solid ground. The construction sector’s earnings are expected to increase 15.8% in Q2 compared with 9% in the earlier quarter. Revenues are also expected to improve 8.4% (6.8% growth in Q1).

Positives such as an improving economy, modest wage growth, low unemployment levels and positive consumer confidence raise optimism about the sector’s performance in 2017. As such, demand for companies’ products should also increase, thereby driving revenues.

Early next week, performance of other construction companies like Lennox International, Inc. (NYSE:LII) and RPM International Inc. (NYSE:RPM) will be closely watched to evaluate their position in investors’ portfolio.

Let’s take a look at how these two construction companies are placed ahead of their quarterly earnings releases on Jul 24.

RPM International Inc. is slated to release its fourth-quarter fiscal 2017 and year-end results on Jul 24, 2017, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 27.27%. The company surpassed estimates in three of the last four quarters, with an average beat of 7.07%.

Currently, the company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate is pegged at $1.17.

However, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Our proven model suggests that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to confidently predict an earnings beat. However, this is not the case here, as RPM carries a Zacks Rank #4 and an Earnings ESP of 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $1.17, reflecting a 3.5% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $1.5 billion, implying a 5.5% increase.

RPM International Inc. Price and EPS Surprise

RPM International Inc. Price and EPS Surprise | RPM International Inc. Quote

Lennox International, Inc., a leading global provider of climate control solutions, is slated to release second-quarter 2017 results on Jul 24, before the market opens. Last quarter, the company delivered a positive earnings surprise of 16.88%. The company has a solid earnings surprise history, surpassing estimates in each of the trailing four quarters, with an average beat of 8.81%.

Lennox might beat earnings this season because it currently has a Zacks Rank #3 and an Earnings ESP of +1.45%. This is because the Most Accurate estimate of $2.80 is higher than the Zacks Consensus Estimate of $2.76.

Further, the Zacks Consensus Estimate of $2.76 per share for the second quarter reflects growth of 8.9% from the year-ago quarter. Also, analysts polled by Zacks expect revenue of $1.09 billion for the quarter, representing a 6.5% upside from the prior-year quarter (read more: Lennox Gears Up for Q2: Another Earnings Beat Coming?).

Lennox International, Inc. Price and EPS Surprise

Lennox International, Inc. Price and EPS Surprise | Lennox International, Inc. Quote

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