Optimistic about Universal Forest

Universal Forest Products, Inc. (UFPI - Analyst Report) yesterday announced its third quarter results. Net earnings were $10.1 million, compared to a loss of $2.0 million in the prior-year quarter. Earnings per share stood at 51 cents versus a loss of 10 cents in the same period a year ago. The improvement in earnings reflects the company’s focus on cost containment.
 
Net sales for the quarter were $457.8 million, compared to last year’s $610.7 million. Sales continue to be adversely impacted by a weak housing market and sluggish consumer spending. These trends are expected to continue for the rest of 2009.
 
The company continues to realize the benefits of earlier decisions, which are yielding improved labor and overhead costs. Additionally, its efforts to diversify and grow its portfolio of products and services are creating growth in certain markets and areas, helping to mitigate the negative impact of weak overall demand.
 
The composite lumber price, which affects the company’s selling prices, was 13% lower in the third quarter of 2009 than in the prior-year quarter. Universal Forest Products believes weak demand will keep lumber prices depressed through the fourth quarter.
 
The company believes that current economic conditions and uncertainties limit its ability to provide meaningful guidance for its financial performance and has chosen to cease the practice of providing guidance for the foreseeable future.
 
The company expects the current challenging conditions to prevail through 2009. However, its strong financial position, solid business model and diverse business opportunities will position it better than most to endure these challenging times. Thus, we upgrade our recommendation from Neutral to Outperform.

Read the full analyst report on UFPI