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Private Construction Companies Show Double-Digit Sales Growth

May 15, 2013, 07:14 AM
Filed Under: Economic Commentary

Sageworks recently analyzed the financial performance of privately held companies in the strengthening construction sector and found that several subsectors have generated double-digit sales growth in the 12 months ended March 2013.

The Private Company Report by Sageworks, a monthly update on the health of private companies in America, shows that general contractors, construction management firms and design/build firms tied to residential building (NAICS code 2361) are currently posting the strongest growth, generating a roughly 21% sales increase. 
Nonresidential builders posted a 14.3% gain over the last 12 months. These categories are especially important because these companies tend to be involved in bigger, higher-dollar projects, and they are often key customers for suppliers and key employers for many of the other construction industries. Both are outpacing growth among privately held companies overall. 
Of the other building-related categories tracked by Sageworks, professionals providing architectural, surveying and engineering services (NAICS 5413) have seen 15% growth. Specialty contractors – a category that includes grading, fencing and paving firms as well as those that install gutters and pools – have increased sales by 14.1 percent, Sageworks data shows. 
Sageworks analyst Brad Schaefer noted that strong growth among residential construction builders is noteworthy, but cautioned that this part of the sector was among the first to face sales declines and faced the steepest drops during 2008 and 2009. While some categories, including architectural services and utility construction, experienced a rebound in sales in 2010 and 2011, the categories including general contractors and homebuilders were flat to negative during those periods. 
In addition to benefiting from stronger new home sales, general contractors might also be seeing more confident homeowners who are now more likely to start a major renovation project that they were a few years ago, he added. Sageworks’ data doesn’t separate construction companies by whether they concentrate on new homes or renovations. 
But new construction and increased sales of existing homes will be important to the sector’s recovery, because remodeling doesn’t historically generate nearly the kind of economic contribution that housing turnover does. The typical buyer of a new or existing single-family home spends about twice as much on property alterations and repairs in the first year after buying than does a homeowner who isn’t planning on moving, according to a previous study by the NAHB. 
Sageworks possesses a proprietary database of privately held company financial statements aggregated by industry. Each day, approximately 1,000 of these financial statements are collected by Sageworks from accounting firms, banks, and credit unions through a cooperative data model with Sageworks clients. The data is segmented and can be queried by 1,400 industry codes, 70 financial metrics, company size, and geographic location.

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