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UFP Industries (UFPI) Gains From Buyouts Amid High Inflation
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UFP Industries, Inc. (UFPI - Free Report) has been gaining from accretive acquisitions and product innovation investments.
Recently, UFPI reported impressive fourth-quarter 2022 results backed by the abovementioned tailwinds. The earnings and net sales surpassed the Zacks Consensus Estimate by 21.4% and 4.7%, respectively. Although net sales decreased year over year due to a decrease in organic unit sales, acquisitions contributed 1% to the sales. Also 36% increase in new product sales positively contributed to the results.
Shares of UFPI have gained 12.1% over the past six months compared with the Zacks Building Products - Wood industry’s growth of 5.5%.
Image Source: Zacks Investment Research
However, the earnings estimates for 2023 have moved south to $7.61 per share from $7.92 over the past 30 days, depicting analysts' concern over the company's prospects. Increase in input prices, labor and freight costs remain headwinds. This wood, wood composite and other products supplier is facing softening of demand and challenging housing market.
Let us discuss the factors.
Tailwinds
Acquisitions have been UFP Industries' preferred mode of solidifying product portfolio and leveraging new business opportunities. In 2022, the company completed four acquisitions with three included in the Packaging segment and one in the Retail segment.
On Dec 6, 2022, UFP Industries acquired Titan Corrugated, Inc. and All Boxed Up, LLC. While Titan Corrugated produces boxes, corrugated shipping containers and point-of-purchase displays, All Boxed Up is a distributor of common box sizes produced by Titan across the United States.
On Jun 27, 2022, it acquired 50% stake in Dempsey Wood Products, LLC, a producer of kiln-dried lumber, pallet lumber and other industrial wood products. These are primarily used in pallet manufacturing. On May 9, the company acquired Cedar Poly, LLC, a plastics recycler, which can be used in manufacturing Deckorators decking.
In 2022, acquisitions contributed 3% to unit sales growth and $25.5 million to adjusted EBITDA. The company’s capital allocation strategy targets acquisitions to provide reasonable returns on investments. UFPI’s balanced business model and diversified product portfolio are major positives in this challenging time.
Also, UFP Industries anticipates gaining from existing product portfolio, initiatives to better production efficiency and solid growth opportunities in the industrial market.
In 2022, new product sales were $736 million, up 53.3% from the year-ago period. Management expects new product sales to meet the target of $795 million in 2023. Per the company, new products are those that generate sales of at least $1 million per year within 4 years of launch, and are still growing and gaining market penetration.
The company is increasing its investments in developing, marketing and selling new products, which is conducive for top-line growth.
Headwinds
UFP Industries is facing higher material, labor and transportation costs that are adversely impacting its business growth.
One of the major cost components of goods sold is the cost of lumber products. The company anticipates that lumber prices will follow seasonal historical trends in 2023. During 2022, the company experienced elevated prices, which it passed on to its clients.
On the fourth-quarter 2022 earnings call, the company unveiled that it expected the mills to better manage the supply side and unless an unexpected high demand, UFPI wouldn’t anticipate the same levels of the lumber market it witnessed in 2022 and 2021. This will likely cause revenues to be lower even on the same level of unit sales. The Retail segment is expected to experience flat unit sales in 2023.
Also, UFPI’s businesses are directly influenced by the U.S. housing market, which is cyclical in nature and is affected by consumer confidence levels, prevailing economic conditions and interest rates. The housing market is currently is witnessing softness in demand due to inflation and increased interest rates,which impact the demand for UFP Industries’ products.
Some better-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). Shares of URI have gained 47% in the past six months. The long-term earnings growth rate is anticipated to be 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 29%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 80.7% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth, from the previous year’s reported levels.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Shares of the company have gained 33.6% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.
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UFP Industries (UFPI) Gains From Buyouts Amid High Inflation
UFP Industries, Inc. (UFPI - Free Report) has been gaining from accretive acquisitions and product innovation investments.
Recently, UFPI reported impressive fourth-quarter 2022 results backed by the abovementioned tailwinds. The earnings and net sales surpassed the Zacks Consensus Estimate by 21.4% and 4.7%, respectively. Although net sales decreased year over year due to a decrease in organic unit sales, acquisitions contributed 1% to the sales. Also 36% increase in new product sales positively contributed to the results.
Shares of UFPI have gained 12.1% over the past six months compared with the Zacks Building Products - Wood industry’s growth of 5.5%.
Image Source: Zacks Investment Research
However, the earnings estimates for 2023 have moved south to $7.61 per share from $7.92 over the past 30 days, depicting analysts' concern over the company's prospects. Increase in input prices, labor and freight costs remain headwinds. This wood, wood composite and other products supplier is facing softening of demand and challenging housing market.
Let us discuss the factors.
Tailwinds
Acquisitions have been UFP Industries' preferred mode of solidifying product portfolio and leveraging new business opportunities. In 2022, the company completed four acquisitions with three included in the Packaging segment and one in the Retail segment.
On Dec 6, 2022, UFP Industries acquired Titan Corrugated, Inc. and All Boxed Up, LLC. While Titan Corrugated produces boxes, corrugated shipping containers and point-of-purchase displays, All Boxed Up is a distributor of common box sizes produced by Titan across the United States.
On Jun 27, 2022, it acquired 50% stake in Dempsey Wood Products, LLC, a producer of kiln-dried lumber, pallet lumber and other industrial wood products. These are primarily used in pallet manufacturing. On May 9, the company acquired Cedar Poly, LLC, a plastics recycler, which can be used in manufacturing Deckorators decking.
In 2022, acquisitions contributed 3% to unit sales growth and $25.5 million to adjusted EBITDA. The company’s capital allocation strategy targets acquisitions to provide reasonable returns on investments. UFPI’s balanced business model and diversified product portfolio are major positives in this challenging time.
Also, UFP Industries anticipates gaining from existing product portfolio, initiatives to better production efficiency and solid growth opportunities in the industrial market.
In 2022, new product sales were $736 million, up 53.3% from the year-ago period. Management expects new product sales to meet the target of $795 million in 2023. Per the company, new products are those that generate sales of at least $1 million per year within 4 years of launch, and are still growing and gaining market penetration.
The company is increasing its investments in developing, marketing and selling new products, which is conducive for top-line growth.
Headwinds
UFP Industries is facing higher material, labor and transportation costs that are adversely impacting its business growth.
One of the major cost components of goods sold is the cost of lumber products. The company anticipates that lumber prices will follow seasonal historical trends in 2023. During 2022, the company experienced elevated prices, which it passed on to its clients.
On the fourth-quarter 2022 earnings call, the company unveiled that it expected the mills to better manage the supply side and unless an unexpected high demand, UFPI wouldn’t anticipate the same levels of the lumber market it witnessed in 2022 and 2021. This will likely cause revenues to be lower even on the same level of unit sales. The Retail segment is expected to experience flat unit sales in 2023.
Also, UFPI’s businesses are directly influenced by the U.S. housing market, which is cyclical in nature and is affected by consumer confidence levels, prevailing economic conditions and interest rates. The housing market is currently is witnessing softness in demand due to inflation and increased interest rates,which impact the demand for UFP Industries’ products.
Zacks Rank & Key Picks
UFPI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). Shares of URI have gained 47% in the past six months. The long-term earnings growth rate is anticipated to be 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 29%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 80.7% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth, from the previous year’s reported levels.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Shares of the company have gained 33.6% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.