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Why Is UFP Industries (UFPI) Up 11.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for UFP Industries (UFPI - Free Report) . Shares have added about 11.8% 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 & Sales Miss Estimates, Decline Y/Y

UFP Industries reported tepid results for the third quarter of 2024. Earnings and net sales both missed the Zacks Consensus Estimate and declined year over year.

The quarterly results were affected by softer demand and broad-based pricing pressures. The company is facing trouble managing the ongoing macroeconomic challenges, aligning its overhead with lower demand levels and eliminating unnecessary costs. Although it is undertaking strategic initiatives and banking on prospective opportunities, the ongoing risks are expected to continue to impact the financial results as it moves into 2025.

Nonetheless, the company aims to obtain more appropriate pricing on strategic acquisitions, invest in new products, automation and technology and pursue organic expansion.

UFPI’s Earnings & Revenue Discussion

UFP Industries reported earnings per share (EPS) of $1.64, which missed the Zacks Consensus Estimate of $1.81 by 9.4% and declined 21.9%% from the year-ago quarter.

Net sales of $1.65 billion also lagged the consensus mark of $1.78 billion by 7.2% and declined 10% year over year. The downside was mainly due to a 7% fall in selling prices and a 3% decline in organic unit sales. New product sales of $119 million contributed 7.2% to total net sales compared with 7.6% in the prior-year quarter.

Segmental Discussion of UFPI

UFP Retail Solutions: The segment reported net sales of $636 million, which declined 13% year over year due to a 7% decline in selling prices and 4% lower organic unit sales. Also, a 2% reduction due to the transfer of certain product sales to the Packaging and Construction segments. Adjusted EBITDA margin rose 40 bps from the prior year to 8%.

UFP Packaging: The segment’s net sales totaled $402 million, down 11% from the year-ago period’s level. Selling prices declined 8% and organic unit sales were down 5% year over year. This was partially balanced by a 2 percent increase from the transfer of certain product sales from the Retail segment. Adjusted EBITDA margin contracted 330 bps from the prior year to 8.6%.

UFP Construction: Net sales in the segment were $535 million, which declined 8% from the year-ago period. The downturn was due to a 7% decrease in selling prices and a 2% decline in organic unit sales. This was partially offset by a 1% increase from the transfer of certain product sales from the Retail segment. Adjusted EBITDA margin contracted 370 bps from the prior year to 9.5%.

UFPI’s Operating Highlights

Selling, general and administrative expenses — accounting for 11.1% of net sales — increased 40 bps year over year.

Adjusted EBITDA of $164.9 million declined year over year from $207.8 million. Adjusted EBITDA margin also contracted 140 bps from the prior year to 10%.

Balance Sheet & Cash Flow of UFPI

As of Sept. 28, 2024, the company had nearly $2.4 billion in liquidity. Cash and cash equivalents were $1.19 billion at the third-quarter end compared with $1.1 billion at the end of 2023. Long-term debt and finance lease obligations were $232 million, down from $274.8 million at 2023-end. Net cash from operating activities was $497.7 million at the third-quarter end compared with $711.8 million in the year-ago period.

On Oct. 23, 2024, the board of directors approved a quarterly dividend payment of 33 cents per share, a 10% increase from the quarterly dividend of 30 cents per share. The dividend is payable on Dec. 16, 2024, to shareholders of record on Dec. 2.

On July 24, 2024, the board of directors authorized the company to repurchase up to $200 million of shares through July 31, 2025. No shares have been repurchased under this new authorization.

UFPI’s Outlook

UFP Industries continues to expect lumber prices to remain lower in 2024, due to existing supply and demand dynamics.

For the fourth quarter of 2024, the company continues to anticipate demand to decrease in Retail by mid-single digits and while Packaging demand is expected to be down by mid- to high-single digits. It now anticipates a decrease in demand for Construction by low-single digit.

Overall, the company expects softer demand and the competitive pricing environment to continue through the remainder of 2024 and into 2025, resulting in more challenging year-over-year unit sales and profitability comparisons, partially offset by market share gains in each of its segments.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -16.33% due to these changes.

VGM Scores

At this time, UFP Industries has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise UFP Industries has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

UFP Industries is part of the Zacks Building Products - Wood industry. Over the past month, Weyerhaeuser (WY - Free Report) , a stock from the same industry, has gained 3.3%. The company reported its results for the quarter ended September 2024 more than a month ago.

Weyerhaeuser reported revenues of $1.68 billion in the last reported quarter, representing a year-over-year change of -16.9%. EPS of $0.05 for the same period compares with $0.33 a year ago.

For the current quarter, Weyerhaeuser is expected to post earnings of $0.05 per share, indicating a change of -68.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -17.4% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Weyerhaeuser. Also, the stock has a VGM Score of F.


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