Still Time to Invest in the Booming Zacks Construction Sector Going into 2024 Capitalizing on the Surging Zacks Construction Sector: Is It Still a Lucrative Move?

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In the wake of the pandemic, the Zacks Construction sector has continued its remarkable ascent, riding the waves of robust demand and a burgeoning backlog. Year to date, the sector has delivered a staggering total return of +52%, easily outstripping the S&P 500’s +22% and even the Nasdaq’s +44%, including dividends.

Remarkably, several Zacks Construction sector stocks still appear undervalued given their strengthening prospects, especially those belonging to top-rated Zacks business industries. This very moment seems opportune for savvy investors eyeing the construction industry.

Notably, three standout stocks in the Zacks Construction sector beckon as promising options for the new year.

Zacks Investment Research
Image Source: Zacks Investment Research

Knife River Corporation KNF

Standing out with a Zacks Rank #1 (Strong Buy), Knife River Corporation, which became a standalone entity following its spinoff from MDU Resources Group (MDU) earlier this year, is currently trading on the New York Stock Exchange. Notably, the stock belongs to the Zacks Building Products-Miscellaneous Industry, presently positioned in the top 11% among over 250 Zacks industries.

Benefiting from a robust business environment, Knife River serves as a mineral aggregates miner and markets a portfolio of construction-related materials, including crushed stone, sand, gravel, ready-mix concrete, and asphalt.

Trading at 21.3X forward earnings, slightly below the S&P 500’s 22.4X and not significantly above its industry average of 18X, Knife River’s stock appears to offer both value and growth. With annual earnings forecasted at $3.13 per share in fiscal 2023 and expected to further rise by 5% in FY24, the stock has seen its earnings estimate revisions for FY23 and FY24 soar by 30% and 16% respectively over the last 60 days. Moreover, the company projects a total sales surge of 8% from last year’s $2.53 billion and a subsequent 6% rise in FY24 to $2.93 billion. In terms of price to sales, Knife River’s P/S ratio of 1.4X stands significantly below the S&P 500’s 3.9X and the industry average of 1.8X.

Zacks Investment Research
Image Source: Zacks Investment Research

CRH CRH

Despite its impressive price performance in 2023, CRH PLC remains a potential winner in the Zacks Construction sector entering the new year. With a Zacks Rank #2 (Buy), the company also falls into the top-rated Zacks Building Products-Miscellaneous Industry, operating as a major provider of cement, concrete products, aggregates, roofing, and insulation within the construction materials space. Spanning the U.S. and Europe, CRH’s stock has surged +73% year to date, significantly outperforming broader indexes and its Zacks Subindustry’s +59%.

Zacks Investment Research
Image Source: Zacks Investment Research

More attractively, CRH shares are currently available at a very reasonable 15.3X forward earnings multiple, making for a substantial discount to the industry average and benchmark. Projected annual earnings are set to rise by 29% in FY23 to $4.49 per share, up from $3.48 per share last year. Furthermore, FY24 is anticipated to witness a 10% surge in earnings. CRH’s total sales are also expected to jump by 13% this year and a further 5% in FY24 to reach $36.9 billion, complemented by a 2.35% annual dividend yield enhancing its appeal at current levels.

Zacks Investment Research
Image Source: Zacks Investment Research

Century Communities CCS

Also carrying a Zacks Rank #2 (Buy), Century Communities is a part of the Zacks Building Products-Home Builders Industry, currently placed in the top 27% of all Zacks industries.

Engaged in land acquisition, development, and sales of various single-family residential home projects, Century Communities has witnessed an impressive +83% surge in its stock price year to date. Despite this, CCS shares still trade at a very appealing 12.3X forward earnings multiple, in close proximity to the industry average of 10.8X. This underscores a potential undervaluation of the stock, especially with projected earnings of $7.44 per share in FY23 after a record-breaking year that saw EPS at $16.16 per share.

Zacks Investment Research
Image Source: Zacks Investment Research

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