The year 2020 was majorly characterized by stay-at-home and social-distancing practices, thanks to the coronavirus pandemic. The increased time spent indoors led many individuals to focus on making homes a comfortable and enjoyable space. In fact, revamping interiors to adapt with work-from-home and remote schooling needs were widely undertaken. Inclination toward home renovation and maintenance projects played out as an upside for several companies in the home improvements space. Moreover, the housing market witnessed higher home buying activities amid the pandemic. This also turned out to be an advantage for companies catering to home improvements needs.
But now that vaccinations are picking up pace, social distancing norms are expected to subside eventually. This is likely to lead to more time being spent outdoors for work, socializing and entertainment needs. As a result, home-renovation projects are anticipated to decline from the current high levels. Nevertheless, industry experts opine that not all pandemic-led favorable impacts will fade in 2021. They believe that work-from-home practices are likely to remain a prominent feature in 2021 as well. Also, many are likely to continue with their interests in keeping homes well maintained.
Additionally, home improvement retailers are expected to keep gaining from rapid urbanization trends. Well, continued development of real estate projects and expansion of cities and towns have helped keeping the demand favorable for home decor items as well as equipments and tools. The demand for products that cater to DIY (do-it-yourself) projects is also likely to stay high. These include products related to gardening and painting projects as well as minor maintenance and repair works.
Apart from these, home improvement players have been gaining from surging online business, stemming from consumers’ inclination toward digital transactions. As a result, players in the home improvements arena have been investing toward boosting their omni-channel capabilities, including online ordering and delivery services. Such upsides are likely to continue in the coming year and drive the performance of key industry players.
With the scenario looking bright for the home improvements industry, investors may consider investing in stocks from this space. We have highlighted three such companies, who are gaining from their strong business-expansion endeavors and favorable market trends
Price Performance
3 Stocks in Focus
First on our list is Builders FirstSource, Inc. BLDR. Based in Dallas, TX, the company supplies and manufactures a range of building materials and components as well as provides construction services. The company, which currently flaunts a Zacks Rank #1 (Strong Buy), has a market capital of $4.76 billion. We note that the company is gaining from higher demand for its integrated services, backed by favorable trends in the housing market and shift to suburban living. Builders FirstSource is also active on the acquisition front, which is supporting the top line. In August 2020, the company entered into a definitive merger agreement with BMC Stock Holdings that will create the nation's premier supplier of building materials and services. Additionally, the company is engaged in disciplined cost-management practices. Impressively, the stock has rallied about 60.2% in the year-to-date period. The Zacks Consensus Estimate for 2021 sales and earnings indicates a rise of 2% and 6.1%, respectively, from the year-ago period’s levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beacon Roofing Supply, Inc. BECN is another potential pick. This roofing materials distributor currently flaunts a Zacks Rank #1 and has a market capital of $2.81 billion. The company is gaining from improved demand for residential products. Moreover, its investments to boost technology infrastructure is supporting growth in the e-commerce platform. Markedly, its new OTC (On-Time and Complete) Delivery Network and newly-designed website are driving in-store and online customers with enhanced product availability, delivery tracking and notifications. The company is also committed toward cost-management efforts. Shares of Beacon Roofing Supply have gained 26.7% in the year-to-date period. The Zacks Consensus Estimate for fiscal 2021 sales and earnings indicates a rise of 3.5% and 22.7%, respectively, from the year-ago period’s levels.
Well known home improvements retailers, The Home Depot, Inc. HD, is also gaining from increased renovation and maintenance projects amid the pandemic. The company is ramping up assortments and delivery systems to effectively meet market needs. Moreover, the company follows a flexible interconnected infrastructure, which aids in quickly adapting to changing customer preferences. This Zacks Rank #3 (Hold) company is gaining from broad-based strength across stores and geographies as well as growing presence in the digital arena. The company is working toward boosting omni-channel functions such as curbside pickup and buy online pickup in store services with convenient pickup lockers. Impressively, the stock has rallied about 24% in the year-to-date period. The company has a market capital of $291.8 billion. The Zacks Consensus Estimate for fiscal 2021 sales and earnings indicates a rise of 0.5% and 4.2%, respectively, from the year-ago period’s levels.
Zacks Top 10 Stocks for 2021
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The Home Depot, Inc. (HD): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
