As the U.S. housing market gradually recovers from the ravages of the global crisis, players in the housing and construction markets are implementing various strategies to strengthen their foothold. According to the U.S. Department of Housing and Urban Development report, housing starts for both single-family and multi-family units increased year over year in the third quarter of 2013.
An active player in the lumber supply chain, Universal Forest Products, Inc. recently announced the signing of an agreement to acquire Belchertown, Mass.-based, National Fiber through one of its subsidiaries. The transaction, financial terms of which are kept under wraps, is anticipated to close by Jan 31, 2014.
National Fiber is a recognized manufacturer of cellulose insulation. Its well know products include Cel-Pak and Nu-Wool, which are mostly supplied to professional cellulose installers throughout New England, New York, Pennsylvania, Maryland and Delaware. Founded in 1978, National Fiber has a sales generation potential of $12.5 million and its takeover by Universal Forest Products will strengthen the latter’s housing and construction business in the northeastern part of the U.S.
Universal Forest Products has compelling long-term growth prospects. The company looks to boost its top-line growth through accretive acquisitions and the addition of new customers and products to its portfolio. Revenue generation is targeted to reach $3 billion with operating margins at normal historical levels by 2017.
The Zacks Consensus Estimate for Universal Forest Products is currently pegged at $1.95 and $3.12 for 2013 and 2014, respectively. These estimates represent year-over-year growth of 81.8% in 2013 and 60.4% in 2014. In the next five years, earnings are estimated to grow 10.0%, above the 6.9% prediction for the industry.
Universal Forest Products currently has a market capitalization of $1.1 billion and carries a Zacks Rank #3 (Hold). Stocks to watch out for in the sector are Potlatch Corporation (PCH - Free Report) , United Rentals, Inc. (URI - Free Report) and Toll Brothers Inc. (TOL - Free Report) . All these companies carry a Zacks Rank #2 (Buy).