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Strong Buy on Universal Forest

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Zacks Investment Research upgraded Universal Forest Products Inc. (UFPI - Free Report) to a Zacks Rank #1 (Strong Buy) on My 11, 2013.

Why the Upgrade?

Universal Forest impressed all with its financial results for the first quarter 2013 reported on Apr 17, 2013. The company rode on the back of its strong sales performance in its five market segments. The share price since then has increased roughly by 11.4%.

Net income of Universal Forest in the quarter grew 25.7% year over year while earnings per share came in at 26 cents, up 24% over 21 cents reported in the year-ago quarter and way above the Zacks Consensus Estimate of one cent.

Net sales grew 21.3% year over year to $554.5 million benefiting from healthy growth in the lumber market. Talking of costs and margins, cost of goods sold, as a percentage of revenue, increased 140 basis points year over year while gross margin decreased by the same magnitude and settled at 10.3%.

Management of Universal Forest looks forward to improving its top-line growth through additions of new customers and products to its portfolio, going forward. Also, operating margin enhancement remains a prime area of focus for the company.

The solid financial performance induced an upward revision in the earnings estimate for Universal Forest. The Zacks Consensus Estimate in the last 30 days has gone up by 21.0% to $1.73 for 2013 and increased by 3.0% to $2.40 for 2014.

Also, a whopping 2,500% positive earnings surprise in the first quarter 2013 has negated negative surprises in the last three quarters, resulting in a positive average of 467.0%. All these positives have raised optimism for better results ahead for Universal Forest.

Other Stocks to Consider    

Universal Forest Products Inc. manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products. The stock currently has a market capitalization of $754.8 million.

Other stocks to watch out for in the industry are Potlatch Corp. (PCH - Free Report) , holding a Zacks Rank #1 (Strong Buy) while Louisiana-Pacific Corp. (LPX - Free Report) and Weyerhaeuser Co. (WY - Free Report) , each with a Zacks Rank #2 (Buy).

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