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Universal Forest (UFPI) Q1 Earnings In Line, Sales Beat

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Building products company, Universal Forest Products Inc. (UFPI - Free Report) reported in-line results for first-quarter 2017, with earnings of $1.03 per share matching the Zacks Consensus Estimate. However, backed by the company’s pro-growth policies, the bottom line grew 8.4% year over year.    

The company’s net sales of $846.1 million surpassed the Zacks Consensus Estimate of $812.6 million. Also, sales increased 24% the year-ago tally on the back of solid performance in three end market-based segments, namely Retail Building Materials, Industrial, and Housing & Construction.

New products sales improved roughly 15.3% year over year to $74.6 million.

Segmental Details

Universal Forest Products’ segmental sales sum up to total gross sales. In the quarter, the company’s gross sales totaled $856.8 million, up 23% year over year. A brief snapshot of end-market sales has been provided below:

Retail Building Materials’ (36.4% of first-quarter gross sales) revenues of $311.8 million increased 15% year over year on the back of improved businesses from big box customers. Unit sales grew 9% and selling prices went up 6% in the quarter.

Industrial sales (32.4%) were $277.2 million, increasing 37% year over year. The growth was primarily triggered by synergistic benefits from acquisition of idX Corporation (closed in Sep 2016) as well as healthy businesses from new and existing customers.

Housing and Construction sales (31.3%) were $267.8 million, up 21% year over year due to impressive businesses from residential construction and manufactured housing customers.

Margins

In the quarter, Universal Forest Products’ margin profile suffered from higher costs and expenses. As a percentage of revenues, the company’s cost of sales increased 80 basis points (bps) to 85.7%. Gross margin decreased 80 bps to 14.3%. Selling, general and administrative expenses were roughly $86.9 million, accounting for 10.3% of net sales.

Balance Sheet & Cash Flow

Exiting the first quarter, Universal Forest Products had cash and cash equivalents of $31 million, below $34.1 million recorded in the preceding quarter. Long-term debt surged 131.8% sequentially to approximately $252.9 million.

In the quarter, the company used net cash of $70.7 million for its operating activities, higher than $30 million used in the year-ago quarter. Capital spent on purchase of property, plant and equipment amounted to $16.5 million, up from $12.9 million used in the year-ago period. Shares worth $0.08 million were repurchased in the quarter.

Outlook

For 2017, Universal Forest Products expects an improvement in the top line, backed by addition of customers and products to its portfolio through organic and inorganic means. Also, enhancement of operating margin remains the company’s primary area of focus.

Zacks Rank & Stocks to Consider

With a market capitalization of $2 billion, Universal Forest Products carries a Zacks Rank #2 (Buy). Currently, investors interested in the building products industry can consider stocks like JELD-WEN Holding, Inc. (JELD - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) and Boise Cascade Company (BCC - Free Report) . While both JELD-WEN Holding and Louisiana-Pacific Corporation sport a Zacks Rank #1 (Strong Buy), Boise Cascade Company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

JELD-WEN Holding earnings estimates for 2017 and 2018 improved over the last 60 days.

Louisiana-Pacific Corp’s earnings estimates for 2017 improved over the last 60 days. Also, the company’s financial performance in the last four quarters was impressive, with an average positive earnings surprise of 66.28%.

Boise Cascade Company’s financial performance in the last four quarters was impressive, with an average positive earnings surprise of 517.51%. Also, earnings estimates for 2017 were revised upward over the last 30 days.

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