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Will UFP Industries (UFPI) Retain its Winning Streak in 2024?
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Shares of UFP Industries, Inc. (UFPI - Free Report) jumped 43.1% year to date, robustly outperforming the Zacks Building Products - Wood industry’s 12.3% growth and the S&P 500 index’s 21.1% increase. The trend is likely to continue in the next year, as this wood and related products supplier has been benefiting from investments in product innovation and acquisition synergies.
Improvements in the U.S. residential market and repair and remodeling activities are also expected to contribute to sales in the future. Its cost-containment efforts and strong liquidity to offset margin-related woes are commendable.
Although 2023 earnings estimates reflect a 26% year-over-year decline, it currently has a VGM Score of A, supported by a Value & Growth Score of A.
Product Innovation & Acceleration to Forgo Pricing-Related Headwinds
New product development is an integral part of UFPI's strategic plan for its business units. It also anticipates to gain from the existing product portfolio, initiatives to improve production efficiency and solid growth opportunities in the industrial market.
In third-quarter 2023, new product sales, as a percent of total sales, rose to 9.7% from 7.8% year over year. The same rose to 9.6% from 7.3% in the first nine months of 2023.
Despite lagging behind its new product sales’ expected target of $795 million for 2023, due to reduced lumber market pricing, the company expects to reach 10% henceforth as it is increasing investments in developing, marketing and selling new products, which is conducive to top-line growth. UFP Industries is exploring intellectual property, technology and process improvement acquisitions and ventures through the Innovation Fund, which is designed to get new products at an earlier stage of development and enable faster commercialization and scaling.
A New Initiative to Digitalize it Business Bode Well
TimberBase — a UFPI company — recently launched a B2B digital platform, TimberBase.com. Purchased from a Germany-based tech start-up — Timber Base GmbH — in February 2023, this platform will ensure efficient buying and selling of lumber and building materials. Supported by UFP Industries’ team of international industry experts, the launched platform is an upgraded version with a more intuitive interface. It is intended to make the buying and selling process for customers and suppliers simpler globally.
UFPI is optimistic about the launch of the new digital platform, as it believes this will provide access to valuable wood baskets throughout the world along with export opportunities. This will be advantageous for its manufacturing operations in North America, Europe, Asia and Australia as it will define new supplier relationships.
Acquisitions & Expansion Strategy to Mitigate Cost & Supply Woes
UFPI aims to focus on strategic buyout investments and maintain a healthy pipeline of acquisition targets in its core businesses to ensure long-term growth and margin improvement and expand its product portfolio and global reach, accompanied by creating incremental value for customers and shareholders. Acquisitions contributed 2% to unit sales growth in the third quarter of 2023.
To that note, the company recently announced its strategic expansion in the global packaging arena with the acquisition of the remaining ownership interests in NORPAL S. de R.L. de C.V. and TIBASA Universal Forest Products S. de R.L. de C.V., two key affiliates in Mexico. The entities will now amalgamate as UFP Palets y Embalajes S. de R.L. de C.V., operating across three key locations, namely Monterrey, Durango and Guanajuato. The acquisition aligns with UFPI's broader strategy to enhance its stature as a world-class packaging solutions provider.
UFPI acquired one company in the third quarter of 2023, four companies in 2022 and nine in 2021. On Sep 20, 2023, the company acquired 80 percent of the equity in Palets Suller, a leading manufacturer of machine-built pallets in Spain, which will drive its game as a global packaging solutions provider. Acquisitions contributed 2% to unit sales growth in third-quarter 2023.
Solid Liquidity Position Helps to Reward Investors Regularly
UFP Industries follows a consistent policy of returning its shareholders’ funds handsomely. This is mainly supported by its strong liquidity position. On Jul 26, 2023, its board approved an increase in its quarterly dividend payment to 30 cents per share, reflecting an increase of 20% year over year. Its board authorized up to $200 million for share repurchases through Jul 31, 2024.
The company had $2.2 billion of liquidity as of Sep 30, 2023. Cash and cash equivalents were $957.2 million at the end of the third quarter compared with $449.1 million a year ago and $559.4 million at fiscal 2022-end. The current liquidity level is sufficient to meet the short-term obligation of $1.5 million as of September 2023 end. The long-term debt was $273.3 million as of Sep 30, 2023, slightly down from $275.2 million on Dec 31, 2022 and $275.4 million a year ago.
Zacks Rank & Key Picks
UFP Industries currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks that warrant a look in the same industry are:
GTES’ expected earnings growth rate for 2023 is 10.5%. The consensus mark for GTES’ 2023 earnings has moved north to $1.26 per share from $1.21 in the past 30 days.
M-tron Industries, Inc. (MPTI - Free Report) currently flaunts a Zacks Rank #1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average.
The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year.
Willdan Group, Inc. (WLDN - Free Report) is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN presently sports a Zacks Rank #1. Its expected earnings growth rate for 2023 is 50%.
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Will UFP Industries (UFPI) Retain its Winning Streak in 2024?
Shares of UFP Industries, Inc. (UFPI - Free Report) jumped 43.1% year to date, robustly outperforming the Zacks Building Products - Wood industry’s 12.3% growth and the S&P 500 index’s 21.1% increase. The trend is likely to continue in the next year, as this wood and related products supplier has been benefiting from investments in product innovation and acquisition synergies.
Improvements in the U.S. residential market and repair and remodeling activities are also expected to contribute to sales in the future. Its cost-containment efforts and strong liquidity to offset margin-related woes are commendable.
Although 2023 earnings estimates reflect a 26% year-over-year decline, it currently has a VGM Score of A, supported by a Value & Growth Score of A.
Image Source: Zacks Investment Research
Let’s check the factors supporting positive investor sentiments amid ongoing headwinds.
Product Innovation & Acceleration to Forgo Pricing-Related Headwinds
New product development is an integral part of UFPI's strategic plan for its business units. It also anticipates to gain from the existing product portfolio, initiatives to improve production efficiency and solid growth opportunities in the industrial market.
In third-quarter 2023, new product sales, as a percent of total sales, rose to 9.7% from 7.8% year over year. The same rose to 9.6% from 7.3% in the first nine months of 2023.
Despite lagging behind its new product sales’ expected target of $795 million for 2023, due to reduced lumber market pricing, the company expects to reach 10% henceforth as it is increasing investments in developing, marketing and selling new products, which is conducive to top-line growth. UFP Industries is exploring intellectual property, technology and process improvement acquisitions and ventures through the Innovation Fund, which is designed to get new products at an earlier stage of development and enable faster commercialization and scaling.
A New Initiative to Digitalize it Business Bode Well
TimberBase — a UFPI company — recently launched a B2B digital platform, TimberBase.com. Purchased from a Germany-based tech start-up — Timber Base GmbH — in February 2023, this platform will ensure efficient buying and selling of lumber and building materials. Supported by UFP Industries’ team of international industry experts, the launched platform is an upgraded version with a more intuitive interface. It is intended to make the buying and selling process for customers and suppliers simpler globally.
UFPI is optimistic about the launch of the new digital platform, as it believes this will provide access to valuable wood baskets throughout the world along with export opportunities. This will be advantageous for its manufacturing operations in North America, Europe, Asia and Australia as it will define new supplier relationships.
Acquisitions & Expansion Strategy to Mitigate Cost & Supply Woes
UFPI aims to focus on strategic buyout investments and maintain a healthy pipeline of acquisition targets in its core businesses to ensure long-term growth and margin improvement and expand its product portfolio and global reach, accompanied by creating incremental value for customers and shareholders. Acquisitions contributed 2% to unit sales growth in the third quarter of 2023.
To that note, the company recently announced its strategic expansion in the global packaging arena with the acquisition of the remaining ownership interests in NORPAL S. de R.L. de C.V. and TIBASA Universal Forest Products S. de R.L. de C.V., two key affiliates in Mexico. The entities will now amalgamate as UFP Palets y Embalajes S. de R.L. de C.V., operating across three key locations, namely Monterrey, Durango and Guanajuato. The acquisition aligns with UFPI's broader strategy to enhance its stature as a world-class packaging solutions provider.
UFPI acquired one company in the third quarter of 2023, four companies in 2022 and nine in 2021. On Sep 20, 2023, the company acquired 80 percent of the equity in Palets Suller, a leading manufacturer of machine-built pallets in Spain, which will drive its game as a global packaging solutions provider. Acquisitions contributed 2% to unit sales growth in third-quarter 2023.
Solid Liquidity Position Helps to Reward Investors Regularly
UFP Industries follows a consistent policy of returning its shareholders’ funds handsomely. This is mainly supported by its strong liquidity position. On Jul 26, 2023, its board approved an increase in its quarterly dividend payment to 30 cents per share, reflecting an increase of 20% year over year. Its board authorized up to $200 million for share repurchases through Jul 31, 2024.
The company had $2.2 billion of liquidity as of Sep 30, 2023. Cash and cash equivalents were $957.2 million at the end of the third quarter compared with $449.1 million a year ago and $559.4 million at fiscal 2022-end. The current liquidity level is sufficient to meet the short-term obligation of $1.5 million as of September 2023 end. The long-term debt was $273.3 million as of Sep 30, 2023, slightly down from $275.2 million on Dec 31, 2022 and $275.4 million a year ago.
Zacks Rank & Key Picks
UFP Industries currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks that warrant a look in the same industry are:
Gates Industrial Corporation plc (GTES - Free Report) manufactures engineered power transmission and fluid power solutions. GTES currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GTES’ expected earnings growth rate for 2023 is 10.5%. The consensus mark for GTES’ 2023 earnings has moved north to $1.26 per share from $1.21 in the past 30 days.
M-tron Industries, Inc. (MPTI - Free Report) currently flaunts a Zacks Rank #1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average.
The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year.
Willdan Group, Inc. (WLDN - Free Report) is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN presently sports a Zacks Rank #1. Its expected earnings growth rate for 2023 is 50%.