We believe that Universal Forest Products, Inc. (UFPI - Free Report) is a solid choice for investors, seeking exposure in the building products space. Strengthening product portfolio, rising demand for repair and remodeling activities, healthy housing starts and synergistic benefits from acquired assets will be advantageous for the company.
The stock, with approximately $2 billion market capitalization, has been upgraded to a Zacks Rank #1 (Strong Buy) on Apr 14. Its investment appeal is further accentuated by a VGM Score of B.
In the last six months, the shares of Universal Forest yielded 1.6% return, lower than 8.3% gain recorded by the industry it belongs to. However, this return was above the 1.4% decline recorded by the Zacks Construction sector.
Why the Upgrade?
A strong brand image and efforts for further improvements in the portfolio add to Universal Forest’s appeal. New products were a hit in 2017, especially those introduced in the UFP-Edge and Deckorators portfolio. In 2017, revenues from new products grew 23.5% year over year while sales growth of 7.6% to $450 million is anticipated for 2018. Notably, in January 2018, UFP-Edge introduced seven new colors for its Charred Wood product line. These new additions will be available in shiplaps and board forms.
Additionally, Universal Forest’s business expansion initiatives, through the acquisition of meaningful businesses, have proved beneficial over time. In this regard, the acquisition of idX Holdings in 2016 is worth mentioning. This buyout is anticipated to generate $290 million in revenues as well as save on costs in 2018.
Also, the company’s acquisition of North American Container Corporation by Jun 1, 2018, will fortify its product portfolio and customer base by bringing corrugated, steel and hardwood packaging solutions under one roof. Furthermore, in January 2018, disposal of Medley, FL-based property will enable the company to improve operational efficiency and optimize the use of resources.
In addition to the synergistic benefits from acquired assets and new products sales, Universal Forest anticipates gaining from the strengthening demand in the U.S. construction market, evident from solid housing starts and impressive demand for repair and remodeling activities.
The company’s Zacks Consensus Estimate is currently pegged at $2.35 per share for 2018 and $2.74 per share for 2019. Estimates for 2018 have been revised upward by 7.3% from the 60-day ago tally. Also, estimates for 2018 and 2019 reflect year-over-year growth of 27.7% and 16.6%, respectively.
Universal Forest is scheduled to report first-quarter 2018 results on Apr 18, after the market closes. The Zacks Consensus Estimate for the quarter is pegged at 42 cents, reflecting year-over-year growth of 23.5%.
Other Stocks to Consider
Some other top-ranked stocks worth considering in the industry are Boise Cascade Co. (BCC - Free Report) , Louisiana-Pacific Corp. (LPX - Free Report) and Trex Company, Inc. (TREX - Free Report) . While both Boise Cascade and Louisiana-Pacific sport a Zacks Rank #1, Trex Company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last 60 days, the earnings estimates for these three stocks improved for the current year. Also, average earnings surprise for the last four quarters was a positive 52.92% for Boise Cascade, 5.18% for Louisiana-Pacific and 11.95% for Trex Company.
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