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Time to Invest in Universal Forest (UFPI) Stock: Here's Why

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We believe that Universal Forest Products, Inc. (UFPI - Free Report) is a solid choice for investors, seeking exposure in the building products space. Strengthening housing market in the United States as well as strategic initiatives to drive organic and inorganic growth bodes well for the company.

The stock has been upgraded to a Zacks Rank #1 (Strong Buy) on Jun 1. It currently has approximately $2.3 billion market capitalization.

It’s worth mentioning here that the company reported better-than-expected results in the first quarter of 2018, with earnings and sales beat of 7.1% and 5%, respectively. Considering the past four results, the company pulled off an average positive earnings surprise of 3.49%.

In the last three months, shares of Universal Forest yielded 12.5% return, outperforming 7.9% recorded by the industry. Also, the stock’s yield comfortably surpassed 0.6% increase of the Zacks Construction sector.



Why the Upgrade?

We believe that strengthening U.S. market and healthy growth prospects of the global economy will create favorable operating conditions for companies in the building products industry. Considering the housing market of the country, increase in housing starts, as well as higher demand for repair and remodeling activities, will spur demand for building products.

The above-mentioned positive aspects may prove to be important growth-drivers for Universal Forest in the quarters ahead. Additionally, the company anticipates gaining from solid growth opportunities in the industrial market, initiatives to better production efficiency and impressive demand for existing products. Furthermore, the introduction of new products — including seven new colors for the Charred Wood product line by UFP-Edge in January — will be beneficial. Revenues of roughly $450 million are anticipated from new products in 2018.

Another interesting aspect about Universal Forest is its acquisitive nature. Over time, the company has solidified its product portfolio and leveraged new business opportunities through the addition of assets. In January 2018, the company acquired Spinner Wood Products and Great Northern Lumber while adding Expert Packaging and Fontana Wood Products to its portfolio in April. These buyouts are anticipated to collectively generate revenues of $50 million annually. Also, the buyout of North American Container Corporation will fortify its product portfolio and customer base by bringing corrugated, steel and hardwood packaging solutions under one roof.

Universal Forest’s commitment toward rewarding shareholders handsomely helps in keeping investors interested in the stock. Notably, in April 2018, the company hiked its semi-annual dividend rate by 6%.

The company’s Zacks Consensus Estimate is currently pegged at $2.57 per share for 2018 and $2.94 per share for 2019, reflecting growth of 9.4% and 7.3% from the respective 60-day ago tallies. Also, estimates for 2018 and 2019 reflect year-over-year growth of 39.7% and 14.4%, respectively.

Universal Forest Products, Inc. Price and Consensus
 

Universal Forest Products, Inc. Price and Consensus | Universal Forest Products, Inc. Quote

Other Stocks to Consider

Some other top-ranked stocks worth considering in the industry are Boise Cascade Company (BCC - Free Report) , Louisiana-Pacific Corporation (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, earnings estimates for these three stocks improved for the current year and the next year. Also, average earnings surprise for the last four quarters was a positive 32.92% for Boise Cascade, 0.75% for Louisiana-Pacific and 11.68% for Trex Company.

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