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Universal Forest Products (UFPI) Up 15.9% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Universal Forest Products, Inc. (UFPI - Free Report) . Shares have added about 15.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock 's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Third-Quarter 2017 Highlights
Universal Forest Products reported record results for third-quarter 2017. Results were driven by double-digits growth in the three business segments, partially offset by higher cost of sales and operating expenses.
Net earnings per share in the quarter came in at $1.64, increasing 21% year over year and surpassing the Zacks Consensus Estimate of $1.43 by 14.7%.
Solid Segmental Performance Drives Top Line
The quarter's net sales were $1,056.6 million, exceeding the Zacks Consensus Estimate of $996.5 million by roughly 6%. On a year-over-year basis, the company's net sales grew 28%. Sales growth in three end market-based segments - Retail Building Materials, Industrial, and Housing & Construction - were healthy.
Unit sales growth was 22%, including 7% organic growth and 15% from acquired assets. Also, favorable pricing added 6% to the quarter's sales growth. New product sales improved roughly 21.7% year over year to $107.7 million, driven by benefits from approximately 35 new products launches since the beginning of the year. Roughly 12 new products were introduced in the third quarter.
Segmental Performance: The company's segmental sales sum up to total gross sales. In the quarter, the company's gross sales totaled $1,071.4 million, up 28% year over year. A brief snapshot of end-market sales has been provided below:
Retail Building Materials (36.6% of third-quarter gross sales): The segment's sales totaled $391.9 million, reflecting growth of 16% over the year-ago quarter. Organic sales grew 5% while favorable pricing and acquisitions benefitted by 4% and 7%, respectively. Businesses from big box and independent customers strengthened further.
Industrial (34.5%): Sales in the segment surged 59% to $369.5 million on the back of synergistic benefits from acquisition of idX Corporation (closed in September 2016) as well as healthy businesses from new and existing customers.
Organic sales grew 11% while gains from price increases and acquired assets added 5% and 43%, respectively.
Housing and Construction (28.9%): Segmental sales were $310 million, up 16% year over year due to impressive business from residential construction and manufactured housing customers.
Unit sales in the quarter grew 8% while increase in prices added 8% to sales growth.
Weak Margins
Universal Forest Products' margin profile suffered from higher costs and expenses. As a percentage of revenues, the company's cost of sales increased 60 bps to 86.3%. Gross margin decreased 60 bps to 13.7%. Selling, general and administrative expenses were roughly $92.4 million, accounting for 8.7% of net sales. Operating margin was down 40 bps to 4.9%.
The company noted that lumber market volatility caused by the adverse impact of hurricanes (Harvey, Irma and Maria) adversely impacted its margin in the third quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Universal Forest Products had cash and cash equivalents of $22 million, below $24.6 million recorded in the preceding quarter. Long-term debt declined 28.8% sequentially to approximately $145.9 million.
In the first nine months of 2017, the company generated net cash of $97.4 million from its operating activities, below $136.4 million in the year-ago period. Capital spent on purchase of property, plant and equipment amounted to $57.2 million, up from $35.7 million used in the year-ago period. Shares worth $13 million were repurchased while dividend of $9.2 million was distributed in the nine months ended September 2017.
Outlook: For 2017, the company anticipates its capital expenditure to total $70 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. In the past month, the consensus estimate has shifted by 13.3% due to these changes.
Universal Forest Products, Inc. Price and Consensus
At this time, Universal Forest Products' stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy).
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Universal Forest Products (UFPI) Up 15.9% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Universal Forest Products, Inc. (UFPI - Free Report) . Shares have added about 15.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock 's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Third-Quarter 2017 Highlights
Universal Forest Products reported record results for third-quarter 2017. Results were driven by double-digits growth in the three business segments, partially offset by higher cost of sales and operating expenses.
Net earnings per share in the quarter came in at $1.64, increasing 21% year over year and surpassing the Zacks Consensus Estimate of $1.43 by 14.7%.
Solid Segmental Performance Drives Top Line
The quarter's net sales were $1,056.6 million, exceeding the Zacks Consensus Estimate of $996.5 million by roughly 6%. On a year-over-year basis, the company's net sales grew 28%. Sales growth in three end market-based segments - Retail Building Materials, Industrial, and Housing & Construction - were healthy.
Unit sales growth was 22%, including 7% organic growth and 15% from acquired assets. Also, favorable pricing added 6% to the quarter's sales growth. New product sales improved roughly 21.7% year over year to $107.7 million, driven by benefits from approximately 35 new products launches since the beginning of the year. Roughly 12 new products were introduced in the third quarter.
Segmental Performance: The company's segmental sales sum up to total gross sales. In the quarter, the company's gross sales totaled $1,071.4 million, up 28% year over year. A brief snapshot of end-market sales has been provided below:
Retail Building Materials (36.6% of third-quarter gross sales): The segment's sales totaled $391.9 million, reflecting growth of 16% over the year-ago quarter. Organic sales grew 5% while favorable pricing and acquisitions benefitted by 4% and 7%, respectively. Businesses from big box and independent customers strengthened further.
Industrial (34.5%): Sales in the segment surged 59% to $369.5 million on the back of synergistic benefits from acquisition of idX Corporation (closed in September 2016) as well as healthy businesses from new and existing customers.
Organic sales grew 11% while gains from price increases and acquired assets added 5% and 43%, respectively.
Housing and Construction (28.9%): Segmental sales were $310 million, up 16% year over year due to impressive business from residential construction and manufactured housing customers.
Unit sales in the quarter grew 8% while increase in prices added 8% to sales growth.
Weak Margins
Universal Forest Products' margin profile suffered from higher costs and expenses. As a percentage of revenues, the company's cost of sales increased 60 bps to 86.3%. Gross margin decreased 60 bps to 13.7%. Selling, general and administrative expenses were roughly $92.4 million, accounting for 8.7% of net sales. Operating margin was down 40 bps to 4.9%.
The company noted that lumber market volatility caused by the adverse impact of hurricanes (Harvey, Irma and Maria) adversely impacted its margin in the third quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Universal Forest Products had cash and cash equivalents of $22 million, below $24.6 million recorded in the preceding quarter. Long-term debt declined 28.8% sequentially to approximately $145.9 million.
In the first nine months of 2017, the company generated net cash of $97.4 million from its operating activities, below $136.4 million in the year-ago period. Capital spent on purchase of property, plant and equipment amounted to $57.2 million, up from $35.7 million used in the year-ago period. Shares worth $13 million were repurchased while dividend of $9.2 million was distributed in the nine months ended September 2017.
Outlook: For 2017, the company anticipates its capital expenditure to total $70 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. In the past month, the consensus estimate has shifted by 13.3% due to these changes.
Universal Forest Products, Inc. Price and Consensus
Universal Forest Products, Inc. Price and Consensus | Universal Forest Products, Inc. Quote
VGM Scores
At this time, Universal Forest Products' stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy).