The strength of the construction industry, along with the increase in manufacturing and service activities, allows the Zacks Construction products – Maintenance services industry to support the improvement of the demand environment.
The essentiality of services, technology and capital management measures help Limbach Holdings, Inc. LMB, ABM Industries Incorporated ATM and Rollins, Inc. ROL to get through the test periods induced by the pandemic.
About the industry
Zacks Building Products – Maintenance Services category companies provide a wide range of services, including electricity, lighting, cleaning, installation, repair, replacement, heating, ventilation, air conditioning ( HVAC), plumbing, landscaping, equipment upgrades, energy monitoring and pest control. The industry is gradually recovering from the weakness induced by the pandemic, as the demand for services increases in residential, commercial and public buildings and in various industries around the world. As these services are essential and cannot be delayed or canceled, demand is expected to accelerate dramatically after the pandemic, helping industry players respond quickly to end markets, recover from supply chain disruptions. induced by Covid-19 and negative effects. financial implications.
What is shaping the future of the building maintenance industry?
Sustained expansion of demand: Revenues, revenues, and cash flow have increased over the past few years, primarily because businesses provide services that consumers generally cannot delay. This has allowed most of the players in the industry to increase their dividends.
Manufacturing and service in pink: As manufacturing and service activities expand, the demand for building maintenance services is expected to increase steadily. Although economic activity in the manufacturing sector declined by 2.4% from November to December, with a manufacturing PMI as measured by the Institute for Supply Management (“ISM”) reaching 58.7%, the reading of over 50% marked the 19th consecutive month of expansion. Non-manufacturing activities fell 7.1% in December from an all-time high of 69.1 in November, with the services PMI index measured by the ISM reaching 62%. With a reading above 50%, this is the 19th consecutive month of service business expansion.
Increase in construction expenses: The construction activity, on which the industry is largely dependent, has strengthened sequentially and year after year. According to the latest release from the US Census Bureau, construction spending in November 2021 was estimated at a seasonally adjusted annual rate of $ 1,625.9 billion, up 0.4% from the October 2021 estimate. and 9.3% from the November 2020 estimate. During the first 11 months of 2021, construction spending increased by 7.9% compared to the same period in 2020.
Zacks industry rankings show bright prospects
The construction products industry – maintenance services, which is part of the larger sector Business services sector, currently carries a Zacks Industry Rank # 18. This ranking places it in the top 7% of over 250 Zacks industries.
the group Industry Rank, which is essentially the Zacks ranking average of all member stocks, indicates strong growth prospects in the near term. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
Analysts covering companies in this industry have steadily pushed their estimates north. Over the past year, the consensus estimate of industry profits for 2022 has shifted 20.2% north.
Before we outline a few stocks that you might want to consider for your portfolio, let’s take a look at recent stock market performance in the industry and their current valuation.
Industry price performance
Over the past year, Zacks Building Products – Maintenance Service has depreciated 17.6% compared to the 23.7% increase of the S&P 500 composite. The broad sector fell 37.5%. % during the same period.
One-year price performance
Current industry assessment
Comparing the industry with the S&P 500 composite on the basis of the 12 month forward price / earnings (P / E) ratio, which is a commonly used multiple for the industry, we see that the industry is trading at 30 , 73X, higher than the S&P 500’s 21.52X and the industry’s 29.65X.
Over the past five years, the industry has traded down to 72.32X, as low as 25.11X and at a median of 37.44X.
12-month forward price / earnings ratio
3 building maintenance stocks to consider
We present three stocks that are currently either Zacks Rank # 1 (strong buy) or Zacks Rank # 3 (Hold) and are well positioned for near term growth. You can see The full list of today’s Zacks # 1 Rank stocks here.
Limbach Holdings, Inc .: The company is a provider of specialized commercial contractual services. She is currently focusing on risk management within an improved project selection framework, maximizing cash flow and liquidity through better management of working capital. While the sales pipeline is strong in most of its existing markets, Limbach is pursuing opportunities in new markets.
Limbach currently sports a Zacks Rank # 1. Zacks’ consensus estimate for the company’s 2022 BPA has risen 8% in the past 60 days.
Price and consensus: LMB
ABM Industries Incorporated: This integrated facilities solutions provider currently has a Zacks rank of 3. ABM’s comprehensive, multi-year strategic plan, ELEVATE, aims to provide customers with offerings that improve transparency and efficiency, by expanding its own system capabilities. talent management, expanding the use of data and modernizing the digital ecosystem. ELEVATE should significantly accelerate the company’s organic growth, improve its strategic and global positioning and strengthen its profitability.
The recently completed acquisition of Able Services is expected to strengthen ABM’s engineering and technical services and expand its sustainability and energy efficiency offerings. The buyout adds $ 1.1 billion in engineering and maintenance services revenue and is expected to generate approximately $ 30-40 million in cost synergies for the company.
Zacks’ consensus estimate for FY2022 EPS has remained unchanged at $ 3.41 for the past 60 days.
Price and consensus: ABM
Rollins, Inc .: This leading provider of pest and termite control services benefits from its balanced approach to organic and inorganic growth. The company’s revenue grew 11.4% in the third quarter of 2021, with acquisitions contributing 2.2% and organic growth contributing 9.2%. All of its lines of business – residential, commercial and termite – are currently in good shape.
Rollins currently holds a rank 3 of Zacks. Zacks’ consensus estimate for 2022 BPA has remained unchanged at 72 cents for the past 60 days.
Price and consensus: ROL
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