3 Stocks to Watch Amid Continued Demand for Home Improvement

As the home became the center for learning and working last year when the coronavirus gripped the United States, people began to engage in renovation and home improvement projects to make their stay at home more comfortable. The demand for homes was also steady in 2020, which in turn, increased the people’s requirement for home improvement. Researchers at Harvard University found that Americans spent nearly $420 billion on home improvement projects in 2020, as cited in a CBS Los Angeles article.

The vaccination drive across the country is leading to the gradual reopening of the economy but even then, the demand for home improvement projects looks set to sustain, auguring well for home improvement retailers. A Fast Company article, citing the 2021 Houzz & Home Study by Houzz, mentioned that the trends of overall home renovation projects are set to continue in 2021. Respondents stated that that they were planning “similar renovation projects this year as well.”

The Fast Company article added, citing Marine Sargsyan, Houzz senior economist that with the shift to the hybrid working model, they anticipate a continued focus on home offices and outdoor projects. Reflective of this trend, spending on home improvement is estimated to grow in 2021. Research assistant Sophia Wedeen, of the Joint Center for Housing Studies of Harvard University (“JCHS”), said that large metro areas are expected to see remodeling gains with an average growth rate of almost 5% compared to an estimated rise of 2% last year, as mentioned in an MReport article. Wedeen further said, as mentioned in the article, “fully 14 metros are projected to see robust growth above 6% this year, while an additional 17 metros are set for moderate gains between 3 and 6%.”

Adding to the positive note, Kitchen Infinity also mentioned in a report citing Home Renovations Statistics and Trends that 52% of Americans are going to spend $15,000 on home repairs this year. The Commerce Department reported that housing starts also increased 6.3% in June as mentioned in a CNBC article.

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3 Stocks to Keep a Close Eye On

The trend for home improvement looks ready to sustain even as we move beyond the pandemic. This, in turn, should be beneficial for home improvement retailers that continue to cater to this trend. Keeping that in mind, we have selected three such stocks that carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

GMS Inc. GMS distributes commercial and residential building materials, and so on, serving homebuilders, individuals and others. GMS also recently completed the acquisition of Westside Building Material, an independent distributor of interior building products, for $135 million in cash. This acquisition will allow GMS to expand its reach in major California markets and foray into the Las Vegas market.

Shares of GMS have risen 56.2% year to date and the company currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 19.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 34.5%.

Beacon Roofing Supply, Inc. BECN distributes residential and non-residential roofing materials, and complementary building products. The demand for home improvement seems to have benefitted the company as in the fiscal second quarter of 2021, sales of residential roofing and complementary products rose 18.7% and 9.4%, respectively. Beacon Roofing’s new On-Time and Complete Delivery Network, which supports in-store and online customers with enhanced product availability and other features, should also augur well.

Year to date, shares of Beacon Roofing have gained 31.7% and it currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 3.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 55.8%.

Builders FirstSource, Inc. BLDR is benefiting from the steady demand for repair and remodeling, and housing as it manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, remodelers and others. The company is also focused on offering innovative digital solutions to its customers and on Jun 29, Builders FirstSource announced that it has entered into a definitive agreement to acquire WTS Paradigm, which provides software development and consulting services to the building products industry.

Shares of Builders First Source have gained 8.3% year to date and it currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased nearly 17% over the past 60 days. The company’s expected earnings growth rate for the current year is 55.8%.

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