It has been about a month since the last earnings report for Universal Forest Products (UFPI - Free Report) . Shares have added about 15.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Universal Forest 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 Q1 Earnings Meet Estimates, Margins Up
UFP Industries, Inc. reported first-quarter 2020 results, wherein earnings met the Zacks Consensus Estimate, while revenues missed the same.
The company noted that the majority of its employees are deemed essential critical infrastructure workers and continue to serve customers. The company has reduced operations and temporarily furloughed a few employees.
On Feb 3, 2020, it announced changes in the frequency of dividend payments from semi-annual to quarterly. It raised quarterly cash dividend by 25% to 12.5 cents a share, in line with the previous quarter. The dividend is payable on Jun 15 to shareholders of record on Jun 1.
Earnings & Net Sales Discussion
The company reported earnings of 65 cents per share, up 12% from 58 cents reported in the year-ago period.
Net sales of $1.03 billion missed the consensus mark of $1.05 million by 1.7% but grew 2% on a year-over-year basis. Lower lumber prices resulted in 3% year-over-year decline of gross sales.
End-Market Sales Discussion
UFP Industries classifies top-line results on the basis of end-markets served. Its end-market sales sum up to total gross sales. Gross sales during the reported quarter came in at $1.05 billion, up 1.9% from the year-ago period.
UFP Retail: The segment reported sales of $365 million during the quarter, up 6.3% year over year. Retail unit sales were up 9% from the year-ago quarter, backed by 26% growth in Home and Décor, 14% rise in both UFP-Edge and ProWood, as well as 8% improvement in Fence, Lawn and Garden. However, lower selling prices partially offset the same by 3%.
UFP Industrial: The Industrial segment’s sales totaled $258.6 million, reflecting a decline of 6.6% from the year-ago period. During the quarter, unit sales remained flat year over year, while the segment’s overall sales declined due to lower lumber prices.
UFP Construction: Sales in the segment were $384.9 million, up 4.3% year over year. A 6% improvement in unit sales was partially offset by a 2% decrease in selling prices. Unit sales in Concrete Forming, Factory Built, Commercial and Site Built grew 15%, 12%, 3% and 1%, respectively, during the quarter.
International sales were $36.3 million, down 0.8% year over year.
Gross margin of 16.5% improved 130 basis points (bps) year over year. Selling, general and administrative expenses — accounting for 10.9% of net sales — increased 50 bps year over year. Operating margin in the quarter improved 90 bps to 5.7%. EBITDA totaled $77.1 million, reflecting an increase of 16.9% year over year.
Balance Sheet & Cash Flow
At the end of the first quarter, cash and cash equivalents were $32.1 million, significantly up from $17.1 million in the comparable prior-year period.
In the quarter under review, net cash used in operating activities totaled $46.2 million compared with $55.8 million a year ago.
During the first quarter, the company repurchased nearly 750,000 shares of its common stock at an average price of $38.62.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -31.14% due to these changes.
At this time, Universal Forest has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Universal Forest has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.