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As investors gear up for the Q4 earnings season, let’s take a look at the overall housing industry. Since the beginning of 2016, construction, one of the 16 broad Zacks sectors, has been looking up with spending surpassing a 10-year high in Nov 2016.

Notwithstanding higher mortgage rates, the construction sector seems to have recovered on the back of strong housing fundamentals. Of the construction companies in the S&P 500 cohort, 15.4% have already reported their Q4 results. According to the Zacks Earnings Preview report, 50% of the companies have surpassed earnings as well as revenue expectations. Total earnings at these construction companies increased 11.9% on 14.8% higher revenues.

The recently released housing data for Dec 2016 has been a mixed bag. Housing starts rebounded in December with monthly volatility for multifamily starts continuing. Total starts were up 11.3% month over month. However, single-family housing starts, which account for the largest share of the residential housing market, posted a monthly decline (down by 4%) in December. That said, it is the fourth strongest monthly pace since the end of recession. On a year-over-year basis, housing starts rose 5.7%.

On considering full-year 2016, single-family construction improved 9.3% over the 2015 level of starts and housing starts rose 4.9%.

Again, building permits, which indicate future construction trends, dropped 0.2% in December month-over-month. The multi-family segment declined 10.1%, which was partly offset by a 4.7% rise in the single-family segment and a 2.7% increase in structures. On a year-over-year basis, building permits went up 0.7%.

As the U.S. homebuilding market staged a striking comeback in December, it is likely that the housing market may have contributed to economic growth in the fourth quarter. Positives like a healthier economy, improving employment levels, positive consumer confidence and a tight supply situation raise optimism about the sector’s performance in 2017. Further, a strong home remodeling market along with strong job data and rising consumer confidence are doing the tricks for these stocks.

So far, some of the leading homebuilding companies have reported their Q4 results. Lennar Corporation LEN beat expectations on both the counts for the fourth time in a row in the fiscal fourth quarter of 2016. KB Home KBH reported its fourth-quarter numbers wherein earnings surpassed analysts’ expectations by 8.1% and revenues by 2%. Meanwhile, Acuity Brands, Inc. AYI missed expectations on the both counts in its recently released first-quarter fiscal 2017 results.

Let us take a look at how these three construction companies are placed ahead of their earnings release on Jan 24.

D.R. Horton Inc. DHI, one of the top builders in the U.S., is scheduled to report first-quarter fiscal 2017 results, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 2.60%. Currently, the company has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Our proven model does not conclusively show that D.R. Horton is likely to beat on earnings this quarter.

For the fiscal first quarter, the Zacks Consensus Estimate for earnings is pegged at 47 cents, up 12.9% year over year. Meanwhile, the consensus estimate for revenues is $2.71 billion, implying a 12.3% increase.

As revealed during the fourth quarter of fiscal 2016 earnings call, D.R. Horton expects that its number of homes closed will approximate the beginning backlog conversion rate in the range of 76% to 80% in the to-be reported quarter.

Again, it anticipates first-quarter home sales gross margin at around 20%, slightly higher than 19.9% recorded a year ago. The company’s order trend remained solid over the past few quarters and is expected to be maintained in the soon-to-be reported quarter as well.

Overall, D.R. Horton continues to maintain a positive outlook with revenues and profits expected to increase double digits in fiscal 2017 annually.