Thanks to ongoing speculation over a coming construction and building boom, a number of big name stocks in these markets have been soaring since the election. Double digit percentage moves aren’t uncommon in this sector, and there definitely seems to be potential for more gains here as well.
However, while many investors have focused on the big, brand-name companies in this market, there are several small caps that could be well-positioned too. Take Simpson Manufacturing (SSD – Research Report) for example. This $2.2 billion maker of construction products has been on the move since the election, and it could be poised for more gains in the near term as well, at least if we look to some recent earnings estimates on the stock.
Analysts have been sharply increasing their expectations for Simpson earnings, including a move in the consensus from 33 cents per share 30 days ago to 40 cents per share today, an increase of over 21%. The full year estimate and the next year estimate have also increased in the past month, moving higher by about 7% each.
Thanks to these moves, the company is now expected to see double digit earnings growth for this year and the next, including a nearly 37% rate of earnings growth for this year. And considering there has been complete agreement among analysts about the short and long term nature of the company—no analysts have reduced their earnings estimates in the past sixty days for any of the periods we study—it is hard not to be a believer in the company right now.
But sometimes, companies seem to have difficulty in living up to lofty expectations like this, as these can be too high for some stocks, leading to poor performances. That really hasn’t been the case for SSD in the past though, as the company clearly knows how to manage earnings expectations.
SSD has seen an average earnings surprise of about 18.8% over the last four quarters, and it hasn’t missed estimates in the last year either. No wonder the stock is a Zacks Rank #1 (Strong Buy), and why we are looking for more outperformance from this company in the near term.
There are some strong macro tailwinds for SSD and other companies like it, as spending on infrastructure and construction is likely to surge over the next few years. For this reason alone, companies like SSD might be worth a closer look.
However, there are plenty of other reasons to like Simpson Manufacturing these days, including its strong history in earnings season, as well as its rising earnings estimates which suggest that better days are ahead for this company, no matter what happens in Washington.
Now, which stocks should you sell?
As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, you may want to consider removing them immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>