Back to top

Image: Bigstock

Universal Forest Products Buys Some Quality Hardwood Assets

Read MoreHide Full Article

Universal Forest Products, Inc. (UFPI - Free Report) recently declared that one of its associates has closed the buyout of certain assets of Nappanee, IN-based hardwood products company, Quality Hardwood Sales, LLC (Quality Hardwood). In addition, the company noted that it has completed the previously announced acquisition of Robbins Manufacturing Co. (Robbins Manufacturing), a Tampa, FL-based manufacturer of premium quality treated wood products.

These acquisitions are expected to boost Universal Forest Products’ inorganic growth trajectory and reinforce its existing product portfolio as well.

Over the last two years, the company’s shares yielded an average return of 91.04% – outperforming 21.58% gain provided by the Zacks categorized Building Products Wood industry.

Inside the Headlines

Quality Hardwood is a manufacturer and supplier of hardwood products such as cabinets used in recreational vehicles or normal households. The company, founded in 2001, has been commercially successful since its inception. Notably, it generated revenues worth $30 million in 2016. Universal Forest Products acquired Quality

Hardwood for an undisclosed amount and stated that the latter would continue to be managed by its existing management post buyout.  

On the other hand, Robbins Manufacturing is a premium manufacturer of preservative treated wood products. Its facilities are located in Georgia, North Carolina and Florida. Financial terms of the company’s acquisition deal remain undisclosed.

The two above mentioned transactions are likely to fortify Universal Forest Products’ position in the hardwood products market, improve its customer base and bolster sales going ahead.

Why a Poor Zacks Rank?

Universal Forest Products currently carries a Zacks Rank #4 (Sell). Escalating expenses remain a major headwind for the company. For instance, in 2016, the company's costs of goods sold increased 11.2%, while operating expenses grew 17.3% year over year. One of the major components of cost of goods sold is the cost of lumber products. The company has no control over the costs and selling prices of lumber products, which are dependent on factors like government policies, environmental regulations, weather conditions, economic conditions and natural calamities.

Notably, headwinds such as the U.S. housing market woes, sudden decline in market demand or a stronger U.S. dollar might hurt top- and bottom-line performances moving ahead.

However, over the last seven days, the Zacks Consensus Estimate for the stock remained unchanged for both 2017 and 2018, reflecting neutral stance of the market. The buyout news are anticipated to boost confidence of the market toward the stock.

Stocks to Consider

Some better-ranked stocks within industry are listed below:

Dycom Industries, Inc. (DY - Free Report) has a positive average earnings surprise of 17.30% for the last four quarters and presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild Corp. (BLD - Free Report) currently carries a Zacks Rank #2 (Buy) and has a positive average earnings surprise of 27.38% for the trailing four quarters.

D.R. Horton, Inc. (DHI - Free Report) also holds a Zacks Rank #2 and has a positive average earnings surprise of 6.27% for the past four quarters.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>

Published in