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UFP Industries (UFPI) Up 9.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for UFP Industries (UFPI - Free Report) . Shares have added about 9.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UFP Industries due for a pullback? Before we dive into how investors and analysts have reacted as 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.

UFP Industries Q3 Earnings Top, Adjusted EBITDA Rises

UFP Industries, Inc. reported stellar results for third-quarter 2021. Both earnings and net sales beat the Zacks Consensus Estimate as well as improved impressively on a year-over-year basis. The uptrend was mainly driven by the diversity of markets and an improved pricing model that quickly adjusts to lumber market fluctuations.

Matthew J. Missad, CEO of UFP Industries, said, “As we anticipated, retail demand and lumber prices have normalized, and our industrial and construction segments are now experiencing favorable growth trends and profitability.”

Encouragingly, the company’s board of directors approved a 33% hike in the quarterly dividend payment to 20 cents per share from 15 cents paid on Sep 15, 2021. The dividend is payable on Dec 15 to shareholders of record on Dec 1, 2021.

Earnings & Revenue Discussion

UFP Industries’ third-quarter earnings came in at $1.93 per share, which comfortably surpassed the consensus mark of $1.55 by 24.5% and increased 54.4% from the year-ago level of $1.25.

Net sales of $2.1 billion outpaced the consensus mark of $1.8 billion by 15.5% and improved 40.9% on a year-over-year basis. Of this growth, 28% was contributed by an increase in selling prices and 16% from acquisitions, partially offset by a 3% decline in organic unit sales.

New product sales were $196.7 million, up 24% year over year driven by recent buyouts.

End-Market Sales Discussion

UFP Retail: The segment reported sales of $696.2 million for the quarter, which declined 0.6% year over year as unit sales fell 1%. A 38% decline in the ProWood business unit owing to an 11% drop in prices and 27% fall in unit sales ailed the segment. Additionally, a 12% increase in UFP Edge was offset by a 17% decline in Handprint, an 8% decrease in Outdoor Essentials and 14% fall in Deckorators. The company experienced unusually high demand attributable to the pandemic-related closures.

UFP Industrial: The Industrial segment’s sales totaled $573.2 million, reflecting growth of 103.2% from the year-ago period. For the quarter, unit sales rose 34% year over year and selling prices increased 69%. Acquisitions of PalletOne and T&R Lumber supported the upside. New product sales increased 93% from the year-ago quarter.

UFP Construction: Sales in the segment were $722.9 million, up 61.7% year over year. This improvement in the segment sales is mainly attributable to a 43% increase in selling price, a 16% rise in unit sales and 3% growth from acquisitions. Unit sales to site-built and factory-built housing customers rose 31% and 17%, respectively. Unit sales to commercial customers also improved 26% from the prior-year quarter. During the reported quarter, new product sales grew 131% from third-quarter 2020.

Operating Highlights

Gross margin of 15.6% contracted 60 basis points (bps) year over year. Selling, general and administrative expenses — accounting for 8.1% of net sales — improved 100 bps year over year. Adjusted EBITDA of $187.5 million increased 49% year over year. Adjusted EBITDA margin also expanded 50 bps to 9% from the prior year.

Balance Sheet & Cash Flow

The company ended the third quarter with approximately $668 million liquidity. Cash and cash equivalents were $138.6 million at third quarter-end compared with $346.2 million at third-quarter 2020-end. For the first nine months of 2021, net cash provided by operating activities was $281.8 million compared with $185.1 million in the corresponding year-ago period.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, UFP Industries has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

UFP Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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