Residential and Commercial Construction Outlooks Diverge

Wall Street’s early 2019 forecast of the construction industry predicts slowing growth in revenues and earnings.

Gardner Intelligence Construction

Wall Street’s latest forecast of the construction industry expects slowing revenue growth in the coming year.  However, earnings projections for commercial and industrial firms are expected to outperform those of residential construction segment.

After reaching new highs in mid-2018, the monthly trend in total put-in-place construction has been steadily falling. The preliminary January reading marked the first time since 2011 that total construction had fallen compared to the same month a year ago. This changing trend in construction has resulted in a significantly lower forecast for the construction industry in late 2019 as compared to the outlook from just six months ago.

Wall Street equities analysts anticipate slowing revenue growth in the construction industry through the end of 2019 according to the latest consensus outlook. Further, the consensus outlook anticipates no growth during the fourth quarter of the year. This is a significant change from the forecast of just two and three quarters ago. At the time, Gardner Intelligence reported that equities analysts expected double-digit revenue growth during the first three quarters of 2019, followed by a 6-percent gain in the fourth.

Separating the construction industry into its non-residential (commercial and industrial) and residential segments reveals only modestly different outlooks. Despite the fact that residential construction revenues have grown at over twice the rate of non-residential construction since 2015, both sectors are expected to struggle during the fourth quarter of 2019. Although analysts expect both sustained low unemployment and low mortgage rates, non-residential construction revenue is projected to grow at 1.3-percent, while the residential construction sector is expected to fall by 1 percent. Beyond 2019, both segments are expected to experience revenue growth approaching 4 percent by the end of 2020.

While both segments are expected to see similar revenue trends, their respective forecasted-earnings pictures are quite different. Earnings growth in the commercial and industrial sectors is projected to fall by almost half over the remainder of 2019, with additional slowing growth in earnings in early 2020. In contrast, earnings growth in the residential segment is expected to steadily decline before turning negative during the second-half of 2020.


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