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Construction Partners (ROAD) to Post Q3 Earnings: What's Up?

Zacks Equity Research

Construction Partners, Inc. ROAD is set to report third-quarter fiscal 2019 results on Aug 8, after the closing bell.

In the last reported quarter, the company’s top and bottom lines outpaced the Zacks Consensus Estimate by 13.2% and 60%, respectively. In fact, its earnings topped the consensus mark in three of the trailing four quarters, recording average positive surprise of 11.88%, buoyed by solid inorganic drive and higher demand for road construction across 31 markets served.

Which Way are Estimates Trending?

For the quarter to be reported, the Zacks Consensus Estimate for earnings has remained unchanged over a month at 30 cents per share. The figure indicates a gain of 3.5% from 29 cents per share reported in the year-ago quarter. Revenues are expected to be $230.5 million, suggesting 18.2% year-over-year growth.

Factors That Might Influence Upcoming Quarterly Results

Construction Partners’ organic and inorganic growth opportunities in the attractive southeastern U.S. road construction/repair market are expected to help the company generate higher revenues in the fiscal third quarter. Favorable project demand in the markets served and higher state funding to support infrastructure projects are expected to act as the biggest catalysts for the to-be-reported quarter. It remains on track to earn 60% of annual revenues in the second half of fiscal 2019, given normal weather patterns, longer workdays and other factors.

It completed three acquisitions, which are likely to have benefited Construction Partners in the quarter to be reported, in a year’s time (ended Mar 31, 2019). Notably, in late February, the company announced two strategic acquisitions; a liquid asphalt terminal in Panama City, FL and an asphalt production and paving company in South Central, FL. The liquid asphalt terminal buyout was part of the company’s vertical integration strategy and enabled it to supply liquid asphalt in the southern portion of its geographic footprint including Florida, Alabama and Georgia.

As of Mar 31, 2019, backlog was $584.8 million. Of this amount, 65% or approximately $380.8 million is expected to be completed during this fiscal. The company’s healthy backlog is expected to drive revenues in the quarter.

Overall, the company’s competitive advantages, comprising vertically integrated operations, scale, strong position in hot mix asphalt production, a robust backlog, and strong growth via organic and acquisition strategies, are likely to aid fiscal third-quarter results.

Here is What Our Quantitative Model Predicts:

Our proven model shows that Construction Partners is unlikely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Construction Partners currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.

GCP Applied Technologies Inc. GCP has an Earnings ESP of +6.90% and a Zacks Rank #3.

Rayonier Inc. RYN has an Earnings ESP of +19.15% and a Zacks Rank #3.

Toll Brothers Inc. TOL has an Earnings ESP of +8.69% and a Zacks Rank #3.

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GCP Applied Technologies Inc. (GCP) : Free Stock Analysis Report
 
Rayonier Inc. (RYN) : Free Stock Analysis Report
 
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
 
Construction Partners, Inc. (ROAD) : Free Stock Analysis Report
 
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Zacks Investment Research