With all eyes on President Biden’s proposed $2 trillion package for infrastructure improvement and economic recovery, companies operating in the infrastructure space are surging currently, based on their projected growth potential. The President proposes to impose a tax hike on corporations to fund his infrastructure plan over the next 15 years.
The infrastructure plan contains provision for the construction and home building industries, given rising market demand and lean inventories. Because the United States is expected to focus on upgrading its infrastructure, the construction materials market is expected to grow at a CAGR of 15.7% over the next four years to reach $1.12 trillion by 2025.
Therefore, we think it wise to invest in infrastructure stocks Owens Corning (OC), Louisiana-Pacific Corporation (LPX), Quanex Building Products Corporation (NX), and BlueLinx Holdings Inc. (BXC). These stocks are well positioned to generate significant returns in the coming months.
Click here to check out our Infrastructure Sector Report for 2021
Owens Corning (OC)
Headquartered in Toledo, Ohio, OC is in the business of composite and building materials systems, delivering a range of products and services. The company operates through three segments—Composites, Insulation and Roofing. Its products range from glass fiber used to reinforce composite materials for transportation, electronics, marine, infrastructure, wind-energy and other markets to insulation and roofing for residential, commercial and industrial applications.
OC paid a quarterly cash dividend of $0.26 on April 2. In March, the company partnered up with Signode Industrial Group to install its next-generation hooder film to reduce water and condensation damage to Thermafiber Mineral Wool. In February, OC was recognized by the Ethisphere Institute as one of 2021’s World’s Most Ethical Companies.
OC is scheduled to announce its fiscal 2021 first quarter financial results on April 28, 2021 before the market opens. During the fourth quarter, ended December 31, 2020, OC's net sales increased 13.8% year-over-year to $1.93 billion. Its gross profit was $484 million, which represented a 26.4% improvement year-over-year. The company’s operating income was $272 million, up 60.9% from the prior-year period. Its adjusted earnings of $207 million for the quarter represents an improvement of 65.6% year-over-year. Its adjusted EPS increased 68.1% year-over-year to $1.90.
Analysts expect OC’s EPS to improve 88.6% year-over-year for the current quarter, ending June 30, 2021 to $1.66. It has surpassed the Street’s EPS estimates in each of the trailing four quarters. And its consensus revenue estimate of $1.91 billion for the next quarter represents a 24.8% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 8.6% per annum over the next five years.
OC climbed 119.6% over the year to close Friday’s trading session at $96.85. Over the past nine months, the stock has gained 75.7%.
It’s no surprise that OC has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
OC has a B grade for Growth, Sentiment, and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see OC’s ratings for Value, Momentum, and Stability here.
In the A-rated Industrial - Building Materials industry, it is ranked #7 of 54 stocks.
Louisiana-Pacific Corporation (LPX)
LPX manufactures and markets building products primarily for use in new home construction, repair and remodeling, and outdoor structure markets. The company operates through four segments—Siding, Oriented Strand Board (OSB), Engineered Wood Products (EWP) and South America. The company sells its products primarily to retailers, wholesalers, and homebuilding and industrial businesses in North America, South America, Asia, Australia, and Europe.
On March 8, LPX paid a quarterly cash dividend of $0.16. In February, it priced an offering of $350 million of 3.6% senior notes, due 2029.
For the fourth quarter ended December 31, 2020 LPX’s net sales was $860 million, which represented a 60.1% rise year-over-year. The company’s gross profit of $351 million represented a 401.4% improvement from the prior-year period. Its income from operations came in at $297 million, compared to a loss from operations of $73 million in the fourth quarter of 2019. Its adjusted income was$219 million for the quarter, up 4280% year-over-year to $219 million. Its adjusted EPS increased 3920% year-over-year to $2.01.
Analysts expect LPX’s EPS to improve 451.2% year-over-year for the next quarter, ending June 30, 2021 to $2.37. The stock had impressively surpassed consensus EPS estimates in each of the trailing four quarters. And its consensus revenue estimate of $873.25 million for the next quarter, represents a 64.6% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 5% per annum over the next five years.
LPX ended Friday’s trading session at $61.60, surging 235.3% over the past year. During the past nine months, the stock has plunged 138.4%.
LPX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Growth and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see LPX’s ratings for Value, Momentum, Stability, and Sentiment here.
LPX is ranked #9 in the same industry.
Quanex Building Products Corporation (NX)
NX manufactures components for original equipment manufacturers (OEM) in the building products industry. The company operates through three segments: North American Fenestration, European Fenestration and North American Cabinet Components. NX’s components can be categorized as window and door (fenestration) components, and kitchen and bath cabinet components. It sells its products through sales representatives, direct sales force, distributors, and independent sales agents.
For the fiscal 2021 first quarter, ended January 31, 2021, NX’s net sales were $230.15 million, which represented an improvement of 17.1% year-over-year. The company’s gross profit came in at $53.75 million, up 37.2% year-over-year. Its operating income increased 497.7% year-over-year to $11.84 million. Its adjusted income of $9.01 million represents a 634.8% rise from the prior-year period. Also, its adjusted EPS increased 575% year-over-year to $0.27.
Analysts expect NX’s EPS for the current quarter, ending April 30, 2021, to be $0.30, up 57.9% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For its fiscal year 2021, analysts expect NX’s revenue to be $955.98 million, representing a 12.3% rise from the prior-year period. The stock’s EPS is expected to grow at 15% per annum over the next five years.
NX has gained 126.1% over the past year and 116.1% over the past nine months. It closed Friday’s trading session at $27.16.
It’s no surprise that NX has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has a B grade for Value and Growth. Click here to see the additional ratings for NX (Momentum, Stability, Quality, and Sentiment).
NX is ranked #3 in the same industry.
BlueLinx Holdings Inc. (BXC)
BXC is a distributor of residential and commercial building products in the United States. The company operates through two segments—Structural and Specialty Products. It also provides a range of services and solutions, such as intermodal distribution services; inventory stocking, and backhaul services. It serves dealers, specialty distributors, national home centers, and manufactured housing customers through a network of distribution centers.
On April 2, BXC repaid the outstanding approximately $16 million principal balance under its term loan facility. This reduces the company’s debt and interest rate burden significantly.
BXC’s net sales increased 41.1% year-over-year to $865.42 million for the fourth quarter, ended January 2, 2021. The company’s gross profit came in at $124.25 million, up 49.7% year-over-year. Its operating income was $30.37 million for the quarter, which represents an improvement of 1261.3% year-over-year. Its net income came in at $19.86 million for the quarter, compared to a net loss of $10.20 million in the prior-year period. The company’s EPS was $2.04, compared to a loss per share of $1.09 in the fourth quarter of 2019.
The consensus EPS estimate of $1.24 for the next quarter, ending June 30, 2021, represents a 74.6% improvement year-over-year. BXC also surpassed consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $846.14 million for the next quarter represents a 21.1% rise on a year-over-year basis.
The stock has gained 813.2% over the past year and 446.2% over the past nine months. BXC closed Friday’s trading session at $45.66.
BXC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Growth, Value, and Sentiment and a B grade for Momentum. We have also graded BXC for Stability and Quality. Click here to access all BXC’s ratings.
It is ranked #11 in the same industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Click here to check out our Infrastructure Sector Report for 2021
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OC shares were trading at $97.53 per share on Monday afternoon, up $0.68 (+0.70%). Year-to-date, OC has gained 29.59%, versus a 10.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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