For Immediate Release
Chicago, IL – October 28, 2026 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Innodata Inc. INOD, Argan, Inc. AGX, Trex Company, Inc. TREX, Quanta Services, Inc. PWR and Sterling Infrastructure, Inc. STRL.
Here are highlights from Tuesday’s Analyst Blog:
5 Construction Stocks That May Surprise This Earnings Season
The U.S. construction sector is expected to have delivered mixed third-quarter 2026 results, supported by robust investments in artificial intelligence (AI)-driven data centers, power infrastructure and public construction projects. However, persistent housing affordability challenges, elevated construction costs and labor shortages likely weighed on profitability.
Construction activity remained uneven during the quarter. Per Dodge Construction Network, total construction starts increased 14.3% year over year in the first nine months of 2026, driven by a 23.7% increase in nonresidential starts and an 18.4% rise in nonbuilding construction. Conversely, residential starts declined 1.7%, highlighting the divergence between infrastructure-led growth and housing-related weakness.
Against this backdrop, third-quarter earnings across the construction sector are likely to reflect differences in end-market exposure, project execution, backlog conversion, pricing power and cost-management capabilities. With the help of the Zacks Stock Screener, some of the companies under the broader Zacks Construction sector — Innodata Inc., Argan, Inc., Trex Company, Inc., Quanta Services, Inc. and Sterling Infrastructure, Inc. — are poised to beat on earnings this reporting cycle.
Per the latest Earnings Trends report, about 15.4% of companies on the S&P 500 Index have reported in the third-quarter earnings season so far. Of these, the Construction sector’s total earnings declined 43% year over year, while revenues fell 8.7%. None of the companies beat earnings per share (EPS) estimates and revenue expectations.
AI and Infrastructure Investments Likely Drove Growth
Accelerating investments in AI-driven data centers, hyperscale facilities and cloud infrastructure are expected to have supported U.S. construction activity during the third quarter of 2026. Growing demand for electrical installations, HVAC systems, modular construction and specialized engineering services likely strengthened revenues and project backlogs. Rising electricity consumption, grid modernization and power generation investments also likely boosted demand for transmission and distribution infrastructure.
Meanwhile, federal and state infrastructure funding is expected to have sustained highway, bridge, airport and water infrastructure projects. Investments in advanced manufacturing, semiconductor facilities and institutional construction likely provided additional support. These trends may have boosted demand for building materials, equipment utilization and rental activity, although project delays and permitting challenges remained concerns.
Housing Weakness and Soft Commercial Demand Hurt Growth
The residential construction market likely remained under pressure amid elevated mortgage rates, affordability constraints and cautious homebuyer sentiment. Higher home prices and financing costs likely dampened demand, prompting builders to offer pricing discounts and mortgage-rate incentives, potentially squeezing margins. According to the U.S. Census Bureau, September housing starts declined 7.4% year over year, reflecting continued market weakness.
Commercial construction likely experienced mixed conditions, with traditional office and retail developments facing softer demand despite healthy investments in specialized industrial and technology-related projects. Building materials, roofing and remodeling activity likely reflected this divergence, with infrastructure-related demand offsetting some residential weakness. Elevated borrowing costs and discretionary spending constraints may have further limited construction activity across certain markets.
Rising Costs and Labor Shortages Likely Pressured Margins
Persistent skilled labor shortages, rising wages, material inflation and supply-chain disruptions are expected to have pressured construction profitability during the quarter. Higher costs for steel, copper, electrical components, fuel and transportation, alongside tariff-related uncertainties, likely increased project expenses. Competition for specialized workers and extended equipment lead times may have further complicated execution schedules.
However, favorable pricing, disciplined procurement, modular construction and operational efficiencies likely helped mitigate these pressures. Strong project backlogs and strategic acquisitions may have supported revenue growth, although integration expenses and working-capital requirements remained challenges.
Overall, earnings likely reflected stronger performance in infrastructure-oriented businesses than in residential construction, with backlog conversion, margin trends and cash generation remaining key indicators of sector health.
Q3 Expectations
Per the latest Earnings Trends report, construction sector earnings are expected to grow 3.4% for the third quarter from a year ago. This indicates a decrease from the second quarter of 2026’s 5.8% growth. Revenues are projected to grow 8.6%, nearly the same as 8.7% growth in the preceding quarter.
The Zacks Methodology
Picking the right stock could be difficult unless one knows the proper method. To make the task simple, we rely on the Zacks methodology, combining a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) and a positive Earnings ESP.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of the Zacks Rank and ESP, chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Winning Stocks
For investors willing to adopt this strategy, we have highlighted five construction stocks that may stand out this earnings season.
Innodata— a global data engineering and AI systems services firm — topped earnings estimates in all the trailing four quarters, with the average surprise being 102.2%.
INOD is likely to beat expectations when it reports third-quarter 2026 results on Nov. 5, 2026, after the closing bell. This Zacks Rank #3 company has an Earnings ESP of +22.53%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for INOD’s third-quarter EPS is pegged at 24 cents, same as the year-ago reported figure.
Strong demand for AI data engineering, reusable datasets and high-value pre-training services is expected to have supported Innodata’s quarterly performance. Expanding opportunities in agentic AI, model evaluation and physical AI are also likely to have contributed to revenue growth.
Argan — an engineering and construction firm operating through wholly owned subsidiaries across power generation, industrial construction and teledata infrastructure — topped earnings estimates in all the trailing four quarters, with the average surprise being 44.2%.
AGX is likely to beat expectations when it reports third-quarter fiscal 2027 results. This Zacks Rank #3 company has an E
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
