'Cranes Across Skylines' Fuels HD Supply, Building Sector - Modern Distribution Management

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‘Cranes Across Skylines’ Fuels HD Supply, Building Sector

Strength in construction end markets propels company to strong 3Q.

HD Supply's third-quarter earnings report further bolstered the building materials and construction sector's dominance in 2015, as distributors with strong footprints in both residential and nonresidential building markets continue to outperform the rest of the industry.

"We believe the construction end market continues to be solid," HD Supply CEO Joe DeAngelo said on Tuesday's earnings call with analysts. "In particular, nonresidential demand continues to be strong in our priority districts. We continue to see cranes across the skyline in most of our major markets and our construction & industrial teams are executing well."

The company's construction & industrial business notched sales of $451 million in 3Q, up 10 percent from the same quarter a year ago.

"We believe the (current construction) projects represent multi-year opportunities," DeAngelo said. "Additionally, our views on residential are largely unchanged. The most recent housing data is mixed with October single-family starts up only 2 percent versus prior year. However, we believe that a moderated and prolonged construction growth trajectory is a solid environment for HD Supply."

"Cranes across the skyline" has been a common theme in building materials and construction. Distributors in this category saw the highest revenue growth (2.8 percent) in the third quarter, according to the most recent MDM-Baird Distribution Survey. And survey respondents expect the sector to outperform other categories in 2016 with 3.8 percent revenue growth.

Stock Building Supply, Huttig Building Products Inc., Beacon Roofing Supply and L&W Supply – the distribution business of USG – all saw 3Q sales increase while companies in other sectors, especially those with exposure to oil & gas, experienced declines.

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