The housing market has picked up steam following a sluggish first quarter. Homes sales declined for the third month in a row following data released last month. Initial data points to a home sales uptick in March ahead of the Spring season, which is the most active in the housing market.
Non-residential construction spending also inched up 0.3%, and March experienced a 1.5% uptick in residential spending. Housing starts also increased 6.6% in April, with an increase of 10% in the first four months of the year.
An improving housing market will lead to several companies profiting and stock prices being boosted as a result.
Three companies to watch closely as the housing market continues to move forward are:
1. LGI Homes, Inc. (LGIH)
LGI Homes designs and constructs homes in four states: Arizona, Florida, Georgia and Texas. The company focuses on entry-level homes and is expected to experience 35.3% earnings growth in 2016.
The company released their Q1 earnings report, which disappointed investors last week.
Lower-than-expected revenue of $162.5 million fell below analyst expectations of $167.6 million. Earnings per share beat expectations of $0.52, with posted EPS of $0.57. Home closings for the company were up 25.8% compared to the same period last year, with revenue from home sales rising 34.6% year over year.
The company has a P/E of 9.06.
2. Universal Forest Products Inc. (UFPI)
Universal Forest Products is a company that engineers, treats, installs and distributes wood, plastic and other building products. The company is positioned for growth as housing starts continue on an upward trend.
The company forecasts 17.5% earnings growth on the year, with estimates increasing 3.1% over the last 30-day period.
UFPI is in a unique position as Q1 earnings beat expectations despite the company’s revenue slumping on the quarter. The company posted an EPS of $0.95, outpacing expectations of $0.87, which was a bright spot for the company.
Net sales inched up 7.8% year-over-year up to $682.2 million, with 17% growth in the company’s retail business and 9.3% growth in the company’s construction business. New product sales were also up 32% year-over-year. Strong growth numbers were overshadowed as revenue missed analyst expectations of $696 million.
3. Installed Building Products, Inc. (IBP)
Installed Building Products is a residential insulation installer in the United States. The company’s expected earnings growth is too high to be overlooked at 78.9%. Over the last 30-day period, the company’s earnings estimates have jumped 9.6%.
The company’s Q1 earnings were released in early May and point to a promising year for the company.
Net revenue on the quarter increased 47.5%, up to $191.7 million. Operating income of $10.6 million was posted, up 254%.
The company had a very impressive start to the year, with several major acquisitions along the way. The company purchased Key Green Builder Services LLZC, Marshall Insulation, LLC and Kern Door Company, Inc. in the first two months of the year.
The company also acquired Alpine Insulation. Alpine had revenue of $23.9 million in 2015, while the first three companies listed had revenues of $20.3 million in 2015. A diverse portfolio of companies and positive growth position Installed Building Products for years of growth as long as the housing sector continues to remain strong.
