After a turbulent 2020, the construction industry witnessed stronger-than-expected growth in 2021. This trend is expected to continue, with construction spending expected to grow 2.7% in 2022.
Although supply chain bottlenecks, labor shortages, and volatile material costs are concerning for the building products space, high demand for multifamily properties due to an increase in population and modular constructions should drive the industry’s growth. In addition, adoption of efficient technologies should improve the ability of companies in the building products space to get new projects and boost their profit margins.
Therefore, prominent building products and equipment stocks Builders FirstSource, Inc. (BLDR), Owens Corning (OC), and Simpson Manufacturing Co., Inc. (SSD) could be ideal picks for 2022.
Builders FirstSource, Inc. (BLDR)
BLDR is a supplier of structural building products, manufactured components, and construction services to the professional market for new residential construction and repair and remodeling. The company operates through four segments – Northeast; Southeast; South; and West. BLDR’s manufactured products include its factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork, and trim, as well as engineered wood.
BLDR’s net sales increased 139.9% year-over-year to $5.51 billion in the third quarter ended September 30, 2021. The company’s gross margin grew 200.1% from the year-ago value to $1.71 billion. Its income from operations rose 499.2% from the prior-year quarter to $837.44 million. Also, the company’s net income increased 613.5% year-over-year to $613.15 million.
Analysts expect BLDR's revenue for the fiscal year 2021 to be $19.55 billion, representing a 128.5% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 201% in the current year. Its stock price has increased 107% year-to-date.
BLDR's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Momentum. We've also graded BLDR for Sentiment, Value, Quality, Stability, and Growth. Click here to access all of BLDR's ratings. BLDR is ranked #26 of 61 stocks in the B-rated Home Improvement & Goods industry.
Owens Corning (OC)
Incorporated in 1938, OC manufactures and markets a range of insulation, roofing, and fiberglass composite materials in the United States, Canada, Europe, the Asia Pacific, and internationally. Composites; Insulation; and Roofing are the segments in which the company operates.
In October, OC introduced “Bourbon” as the 2022 Shingle Color of the Year (SCOTY) and the newest color in the company TruDefinition Duration Designer Colors Collection shingle line. This new introduction should provide the homeowners with high-performing products while they invest in home improvements.
During the third quarter ended September 30, 2021, OC’s net sales increased 16.2% year-over-year to $2.21 billion. The company’s gross margin grew 24.9% from the year-ago value to $596 million. Its operating income rose 34.2% from the prior-year quarter to $392 million. Also, the company’s net earnings increased 25.7% year-over-year to $259 million.
OC's revenue is expected to increase 5.4% year-over-year to $8.85 billion in the fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to increase 68.5% in the current year. Moreover, the stock has gained 19.2% over the past year and 19% year-to-date.
OC's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has a B grade for Value, Momentum, and Quality.
In addition to the POWR Rating grades I've just highlighted, one can see OC's ratings for Growth, Stability, and Sentiment here. The stock is ranked #14 of 55 stocks in the B-rated Industrial – Building Materials industry.
Simpson Manufacturing Co., Inc. (SSD)
SSD manufactures wood construction products that provide connectors, truss plates, fastening systems, fasteners and shear walls, and concrete construction products. The company also offers engineering and design services and software solutions that facilitate the specification, selection, and use of its products. SSD markets its products in several countries, including the United States, Canada, France, the United Kingdom, Germany, Denmark, Switzerland.
SSD’s net sales for the third quarter ended September 30, 2021, increased 8.9% year-over-year to $396.74 million. The company’s gross profit grew 14.3% from the year-ago value to $198.03 million. Its income from operations rose 10.2% from the prior-year quarter to $100.62 million. Also, the company’s net income increased 10% year-over-year to $73.78 million.
SSD's revenue for the fiscal year 2022 is expected to be $1.8 billion, representing a 17.8% year-over-year growth. The company has surpassed the consensus EPS in three of the trailing four quarters. Its EPS is expected to increase 27.9% in the current year. The stock has surged 32.1% over the past nine months and 47.8% over the past year.
It is no surprise that SSD has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Quality and a B grade for Momentum.
Click here to see the additional POWR Ratings for SSD (Sentiment, Stability, Growth, and Value). SSD is ranked #33 of 92 stocks in the Industrial – Equipment industry.
BLDR shares were trading at $84.91 per share on Wednesday afternoon, up $0.45 (+0.53%). Year-to-date, BLDR has gained 108.06%, versus a 29.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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