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Lower Volume & Price to Hurt UFP Industries' (UFPI) Q3 Earnings

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UFP Industries, Inc. (UFPI - Free Report) is expected to report lower sales and earnings when it reports third-quarter 2023 results.

In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 2.5%, while net sales missed the same by 11.3%. Furthermore, on a year-over-year basis, earnings and net sales decreased 26.9% and 29.5%, respectively.

UFP Industries’ earnings topped the consensus mark in three of the trailing four quarters and missed on one occasion, the average surprise being 11.2%.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter 2023 earnings has moved south to $2.13 per share from $2.15 over the past 60 days. The estimated figure indicates a 19.9% decrease from the year-ago quarter’s reported earnings of $2.66 per share. For net sales, the consensus mark is pegged at $2.04 billion, suggesting a 12.4% year-over-year decline.

UFP Industries, Inc. Price and EPS Surprise

UFP Industries, Inc. Price and EPS Surprise

UFP Industries, Inc. price-eps-surprise | UFP Industries, Inc. Quote

Factors to Note

UFP Industries’ net sales are anticipated to have declined in the third quarter. The business of this wood and related products supplier depends on the demand pattern in retail, industrial, and construction markets. The current market scenario reflects slow housing starts (compared to the year-ago period) owing to high mortgage rates, reduced housing demand and ongoing economic challenges. Given these economic uncertainties, consumers have become more selective and price-conscious, which is reflected in the comparatively lower spending year over year. Also, lumber market volatility and labor constraints are likely to have impacted the company’s top line, reflecting lower selling prices.

Nonetheless, the low existing house supply is expected to provide some respite for the company’s quarterly performance. Also, focus on innovation, efficiencies, and value-added solutions are expected to have contributed to gross margins despite lower top and bottom lines, given reduced pricing and volumes.

Meanwhile, from the margin perspective, higher manufacturing costs, more competitive pricing, variable lumber prices, and higher labor and transportation expenses are expected to have weighed on the company’s bottom line.

Segment-wise, our model predicts a year-over-year decline in the net sales of Retail solutions (which accounted for 45% of net sales in second-quarter 2023) by 3.6%, Packaging (27.8% of net sales) by 10.3% and Construction (43.6% of net sales) by 21.2% to $815.2 million, $524.3 million and $612.1 million, respectively.

We predict earnings from operations for the Packaging and Construction segments to decline 16.2% to $64.8 million and 36% to $70.7 million, respectively, year over year. On the other hand, we expect earnings for operations for the Retail segment to increase 46.4% to $42.3 million year over year.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for UFP Industries this time around. The company does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.

Earnings ESP: UFPI has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat for their respective quarters to be reported.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +6.36% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KBR’s earnings for the to-be-reported quarter are expected to increase 12.3%. The company reported better-than-expected earnings in all the last four quarters, the average surprise being 10.8%.

Dycom Industries, Inc. (DY - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank of 2.

DY’s earnings for the to-be-reported quarter are expected to grow 43.9%. The company reported better-than-expected earnings in all the last four quarters, the average surprise being 147.4%.

Howmet Aerospace Inc. (HWM - Free Report) has an Earnings ESP of +2.31% and a Zacks Rank of 3.

HWM is expected to register a 19.4% increase in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in two of the last four quarters and met on the other two occasions, the average surprise being 3.2%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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