The Q2 earnings season is gathering steam with 15.4% of the construction companies having already released their numbers. And they’re unblemished with earnings as well as a revenue beat ratio of 100%. Major homebuilders such as KB Home (KBH – Free Report) , Lennar Corp. (LEN – Free Report) and Toll Brothers Inc. (TOL – Free Report) have outperformed the Zacks Consensus Estimate by 26.92%, 16.67% and 17.74%, respectively.

The case for investing in homebuilding stocks looks good in the light of the above arguments. So, it is a profitable strategy to zero in on a handful of homebuilders that are poised to beat earnings estimates this quarter. An earnings beat should help these stocks gain investor confidence, paving the way for strong price appreciation.

Investor sentiment is quite high at the start of the second-quarter reporting cycle given the solid earnings outlook and favorable homebuilding/housing industry fundamentals. The S&P Homebuilders Select Industry Index has returned 14.6% year to date. The Zacks categorized Building-Residential/Commercial industry has gained almost 30% so far this year, faring a lot better than the broader market (S&P 500) that has returned 9.3%.