AYI - Wells Fargo looks to renovation names to benefit in nonresidential construction

In an update on nonresidential construction, amid a weak backdrop for the sector, Wells Fargo says it's seeing too much focus on new construction dynamics - including data such as starts, permits, Architecture Billings Index and Put-in-Place measures - and not enough on such issues as renovation mix, or which management teams can deliver outperformance. And it's renovation that looks to be "the most underappreciated opportunity at the moment," analyst Deepa Raghavan says. The focus on permits and starts is "unwarranted," as there will probably be decoupling of company revenues vs. not only leading indicators like starts and ABI, but also coincident indicators like PIP. In the last recovery, Raghavan notes, most companies inflected to positive revenue growth by about 1.5 years, while PIP, ABI and Dodge stayed "pressured for a few years." That's because most of those indicators are weighted to new construction, while the companies will turn their

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Wells Fargo looks to renovation names to benefit in nonresidential construction