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5 Construction Stocks Set to Carve a Beat in Q1 Earnings
Shrabana Mukherjee
6 min read

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The U.S. construction sector showed clear signs of deceleration. Public sector investments in infrastructure and manufacturing are likely to have supported growth, while residential remodeling and selective new home construction likely remained a headwind. High borrowing costs, labor shortages, material price volatility, and regulatory complexity continue to pose significant challenges.

With the help of the Zacks Stock Screener, some of the companies under the broader Construction sector, including Dream Finders Homes DFH, Primoris Services PRIM, PotlatchDeltic Corporation PCH, Martin Marietta Materials MLM and MasTec MTZ are poised to beat on earnings this reporting cycle. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Per the latest Earnings Trends report, the first-quarter earnings season has so far seen releases from approximately 35.3% of the construction sector’s market capitalization on the S&P 500 Index. Of them, the sector’s total earnings are down 20% from the year-ago period on 4.2% lower revenues, with 57.1% beating earnings per share (EPS) and 42.9% surpassing revenue estimates.

Factors Influencing Construction Stocks’ Q1 Results

One of the biggest tailwinds for the industry was the ramp-up of federal spending through the Infrastructure Investment and Jobs Act (IIJA). Transportation, water infrastructure, and broadband projects saw significant funding releases, resulting in a surge of activity in public works. Complementing this were industrial construction projects tied to the CHIPS Act and Inflation Reduction Act, which spurred the building of semiconductor fabs, EV battery plants, and clean energy facilities.

In the residential construction market, although a persistent shortage of existing homes is expected to have driven demand, high mortgage rates lingering, seasonal impacts, ongoing inflationary pressures and rising costs (material, labor, land) are expected to have weighed on performance. Also, homebuilders are navigating through a tough situation given increased incentive actions and lower average selling prices, thereby pressuring margins.

In commercial construction, the market was perhaps mixed but resilient. Industrial and warehouse projects are expected to have remained a bright spot, buoyed by e-commerce, supply chain reshoring, and manufacturing expansion. Data center construction may also have gained traction, driven by cloud computing and AI infrastructure needs. Hospitality construction is expected to witness a mild recovery alongside rebounding travel, while office and retail segments continue to struggle due to changing work patterns and consumer behavior.

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