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Here's Why You Should Invest in UFP Industries (UFPI) Now

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UFP Industries (UFPI - Free Report) has been reaping the benefits of solid U.S. residential market and robust demand for repair and remodeling (R&R) activities. Also, the company’s consistent focus on acquisition strategies bodes well. Solid liquidity position and capacity to reward shareholders are added positives.

Notably, shares of UFP Industries have gained 17.8% over the past three months compared with the industry’s 18.5% rally. Although, shares slightly lagged the industry’s rally, earnings estimates for the first quarter, second quarter and full-year 2021 have moved up 42.4%, 31.6% and 30.4%, respectively, over the past seven days. This trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company also has a solid earnings surprise history. UFP Industries’ earnings surpassed the Zacks Consensus Estimate in seven of the trailing eight quarters.



Major Growth Drivers

Inorganic Initiatives: Acquisitions are an important part of UFP Industries’ growth strategy. The company prefers to solidify its product portfolio and leverage business opportunities through acquisitions. The most recent one is the acquisition of J.C. Gilmore Pty Ltd (Gilmores) by the company’s subsidiary, The UBEECO Group. Gilmores is an Australian company, which is a major distributor to the industrial and construction industries across the country. This acquisition will extend UFP Industries’ presence in Australia and expand the company’s portfolio in protective packaging, thereby enhancing its industrial packaging product offerings and customer base across the country.

In January 2021, the company acquired PalletOne and SunBelt. The acquisition of PalletOne will give the company a platform to add products and services and will create a new customer base.

During the fourth quarter of 2020, acquisitions contributed 4% and 5% unit sales growth in UFP Industrial and UFP Construction segments, respectively. Also, the company is optimistic about making several acquisitions in the upcoming quarters that are in the pipeline.

Restructuring of Product Portfolio: Being part of a product-based industry, UFP Industries demands continuous product innovation for growth in the market. The company expects gaining from its existing product portfolio and takes many initiatives to enhance production efficiency. Also, the company is optimistic about regularly introducing products in the market. In 2020, new product sales grew 26% from the year-ago period to $539 million. It is focused on achieving annual new product sales of at least $548 million in 2021. The company is boosting investments for developing, marketing and selling new products, which will accelerate its top-line growth, especially retail business. Retail unit sales improved 38%, 76%,16% and 9% for the fourth, third, second and first quarter of 2020, respectively, backed by product growth. The company is optimistic about expansion of its portfolio of UFP-Edge Timeless, Cavalry Blue, UFP-Edge products, Deckorators brand products and professional installations. Its ProWood FR and Outdoor Essentials products also raise hope.

Improved Housing Market and R&R Activities: Declining mortgage rates have been driving the U.S. residential market of late. Also, with more work-from-home and stay-at-home orders amid the pandemic, demand for repair and remodeling activities has increased many folds over the last few quarters. Greater-than-expected demand for home improvement products has been benefiting the company. This demand has been a boon for UFP Industries and companies like Louisiana-Pacific Corporation (LPX - Free Report) , Rayonier Inc. (RYN - Free Report) and Weyerhaeuser Company (WY - Free Report) in the Zacks Building Products – Wood industry. While Louisiana-Pacific and Weyerhaeuser carry a Zacks Rank #1, Rayonier has a Zacks Rank #2 (Buy).

Returns to Shareholder: UFP Industries significantly rewards shareholders on a timely basis. This approach has worked in favor of the company for gaining investors’ trust. Notably, on Jan 28, 2021, the company’s board approved a quarterly dividend payment of 15 cents per share, bringing the annual total for 2021 to 60 cents per share, reflecting a 20% increase from the dividend paid in 2020.

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