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UFP Industries (UFPI) Buys Polyethylene Recycler Cedar Poly

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UFP Industries, Inc. (UFPI - Free Report) continued its acquisition spree with the latest buyout of Cedar Poly LLC via its subsidiary Deckorators, Inc. The purchase price is $17 million and comprises incentive payments. Cedar Poly will operate in UFP’s Deckorators business unit.

Cedar Poly is a Tipton, IA-based full-service recycler of high-density and low-density polyethylene flakes and pellets. These pallets are used in composite decking and other products. Cedar Poly, which generated $17.3 million sales in 2021, also recycles corrugate and operates its own transportation fleet.

In view of the latest buyout, Landon Tarvin, the vice president of Deckorators, said, “Cedar Poly allows us to vertically integrate our sourcing of recycled polymers and increase our use of post-industrial waste materials in our industry-leading products without compromising quality.”

With this addition, UFP will be able to expand its Deckorators product line using more sustainable raw materials. Notably, UFP has plans to invest in more capabilities at Cedar Poly’s operations that will serve both Deckorators’ and Cedar Poly’s existing customers.

UFP is expected to benefit from the growing decking market, which is projected to double in size during the next 5-7 years, with composite decking accounting for most of that growth.

Acquisition Strategy a Boon

Acquisitions have been a preferred mode of solidifying UFP’s product portfolio and leveraging new business opportunities. Acquisitions contributed 7% to unit sales growth in first-quarter 2022. Acquisitions contributed $10 million to quarterly earnings.

On Dec 27, 2021, the company acquired Howell, Michigan-based Ultra Aluminum Manufacturing, Inc. Ultra Aluminum designs and produces an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers and wholesalers. In December, its affiliate, UFP Packaging, LLC, acquired Grand Rapids, Michigan-based Advantage Label & Packaging, Inc. The deal includes $2.9 million for related real estate and incentive payments of up to $4.5 million over five years, subject to certain performance goals. Acquisitions contributed 24% to unit sales growth in 2021.

The company’s capital allocation strategy targets acquisitions to provide reasonable returns on investments. UFP’s balanced business model and diversified product portfolio are the major positives in this challenging time.
 

Zacks Investment Research
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UFPI shares have lost 13.8% so far this year compared with the Zacks Building Products – Wood industry’s 19% decline. UFP Industries is benefiting from a solid U.S. residential market and high demand for repair and remodeling activities. Also, buyout gains and shareholders' rewards will work in its favor.

Zacks Rank & Key Picks

UFP Industries currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Louisiana-Pacific’s shares have lost 5.7% in the year-to-date period. LPX is a Zacks Rank #1 stock. The company’s earnings estimates for 2022 have increased to $14.87 per share from $13.02 over the past seven days.

Weyerhaeuser Company (WY - Free Report) is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.

Weyerhaeuser shares have lost 4.8% in the year-to-date period. WY is a Zacks Rank #1 stock. The earnings estimates for 2022 have increased to $2.97 per share from $2.83 over the past seven days.

Boise, ID-based Boise Cascade Company (BCC - Free Report) — which makes wood products and distributes building materials in the United States as well as Canada — is aided by factors like favorable commodity wood products, pricing, and robust construction activity.

Boise Cascade, currently carrying a Zacks Rank #2 (Buy), has seen its shares jump 14.7% in the year-to-date period. Earnings estimates for 2022 have moved north to $15.07 per share from $14.02 over the past 60 days.

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