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UFP Industries (UFPI) Rides on Solid Acquisitions, Innovation

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Acquisitions have been an integral part of UFP Industries’ (UFPI - Free Report) portfolio enhancement strategy. Also, robust product innovation, solid U.S. residential market, and strong demand for repair and remodeling activities bode well. Despite higher lumber prices, and rising labor and transportation costs, the company is capable of dealing with the current market situation as it has a solid liquidity position.

Let’s discuss the factors driving its growth.

UFP Industries has been following a systematic inorganic strategy to expand market reach and boost profitability, while strengthening the product portfolio. Recently, the company acquired the assets of Minneapolis, MN-based Endurable Building Products, LLC.

On Apr 19, 2021, it acquired Walnut Hollow Farm, which produces a variety of finely finished wood surfaces used in hobby, craft and woodworking projects as well as in taxidermy. Additionally, Sunbelt Forest Products, its wholly-owned subsidiary, completed the acquisition of Spartanburg Forest Products and its affiliates on Apr 12, 2021. Both the buyouts will expand UFP Retail Solutions’ customer base and product offerings. Notably, acquisitions added 23% to unit sales growth during the first quarter of 2021.

Apart from strong inorganic moves, the company is poised to benefit from the rising demand for repair and remodeling activities in the quarters ahead. UFP Industries’ continuous efforts to introduce new products will also likely give a boost to its performance. In 2020, new product sales grew 26% from the year-ago period to $539 million. For first-quarter 2021, the metric grew an impressive 58% year over year. It remains focused on achieving annual new product sales of at least $548 million in 2021.

New products continue to be an important top-line driver for UFP Industries, especially for the retail business. Retail unit sales improved 38%, 76%, 16% and 9% for the fourth, third, second and first quarters of 2020, respectively, backed by new product growth and market share gains.

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 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.

Although increased lumber prices and labor and transportation costs are putting pressure on the company’s performance, the above-mentioned factors will certainly drive growth.

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