UFP Industries, Inc. (UFPI Quick QuoteUFPI - Free Report) reported impressive results in third-quarter 2022, with earnings and net sales beating the Zacks Consensus Estimate and increasing on a year-over-year basis.

Shares of this wood manufacturer and supplier moved up 4.09% in the after-hours trading session on Oct 20, post news release.

Matthew J. Missad, CEO of UFP Industries, said, “UFP’s ability to deliver record-setting performance in a challenging economic environment is a direct result of the efforts of our hard-working teammates and a balanced business model that minimizes risk by operating in diverse but complementary markets. Our market-focused organizational structure helps us to better address customer needs, and our increased commitment to innovation and new, value-added products continues to improve our operating results and set us apart from competitors.”

Earnings & Revenue Discussion

UFP Industries’ quarterly earnings came in at $2.66 per share, which surpassed the consensus mark of $2.51 by 6% and increased 37% from the year-ago level of $1.94.

Net sales of $2.32 billion outpaced the consensus mark of $2.28 billion by 2% and rose 11% year over year. The growth is attributable to a 6% rise in prices and a 5% increase in unit sales (including 2% from buyouts).

New product sales were $178 million, up 38% year over year, mainly driven by Deckorators mineral-based composite decking and Strip Pak mixed-material packaging solutions.

Segment Discussion

UFP Retail Solutions: The segment reported sales of $845 million for the quarter, which increased 21% year over year. A 15% rise in selling price and a 6% improvement in unit sales drove the result. Unit growth was driven by increases in the pressure-treating operations (Sunbelt Forest Products and ProWood), Deckorators and UFP-Edge. Gross margin rose to 9.2% from 1.6% a year ago.

UFP Industrial: The Industrial segment’s sales totaled $585 million, reflecting growth of 2% from the year-ago period. For the quarter, selling prices increased 1% year over year and acquisitions contributed 3%. Organic unit sales dropped 2% from the prior-year quarter due to an intentional change in product mix. The segment focuses more on higher-margin products and is selective in taking on new business.

New product sales increased 52% to $64 million. The segment contributed 74% to total value-added sales. Gross margin rose 250 basis points from a year ago, thanks to the company’s ability to pass on the impact of higher operating costs and successfully implement value-based selling initiatives.

UFP Construction: Sales in the segment were $777 million, up 8% year over year. This improvement in segment sales is mainly attributable to an 8% rise in organic unit growth. The upside was driven by the Factory Built, Commercial and Concrete Forming Services business units.

Operating Highlights

Selling, general and administrative expenses — accounting for 9.2% of net sales — increased 110 basis points (bps) year over year. Adjusted EBITDA of $274 million increased 46% year over year. Adjusted EBITDA margin also expanded 280 bps from the prior year to 11.8%.

Balance Sheet & Cash Flow

The company ended the third quarter with $1.5 billion in liquidity as of Sep 24. Cash and cash equivalents were $455.7 million at quarter-end compared with $138.6 million a year ago. For the first nine months, net cash from operating activities was $535.4 million versus $281.8 million in the corresponding year-ago period.

During the first nine months of 2022, capital expenditures totaled $115 million.

From February to Sep 24, UFPI purchased approximately 1.2 million shares at an average price of $77.06 under the share repurchase plan. Also, it issued 913,000 shares in 2022 at an average issue price of $82.69 per share for share-based compensation programs.

Guidance

UFPI expects its balanced business model and operational improvements will continue to help it navigate new challenges like rising interest rates and historically high inflation. In the near term, it expects more normalized demand in its largest segment — UFP Retail Solutions.

In the industrial segment, pricing remains healthy as it passes through inflationary costs and benefits from the focus on value-added products. In the construction segment, the company witnesses continued activity in commercial and infrastructure end markets, which is softening the housing market. The diversified business and end markets will likely deliver good returns to shareholders.

The company anticipates $175-225 million in capital expenditures in 2022, up from $151 million in 2021.

Zacks Rank & Recent Construction Releases

Currently, UFP Industries sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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