Universal Forest shares fall as analyst cautions

Universal Forest Products fall after analyst cites challenges in do-it-yourself, home building

• On 3:05 pm EDT, Friday October 16, 2009

NEW YORK (AP) -- Shares of Universal Forest Products Inc. fell Friday after an analyst warned that the lumber and wood packaging producer faces challenges for the rest of the year from "lower construction activity and challenging economic conditions."

The Grand Rapids, Mich., company, which reported Thursday a third-quarter profit that beat analyst expectations, is facing continued pressure on its revenue and share price, which is high by historical standards, said Morgan Keegan analyst J. Keith Johnson.

The analyst reiterated his "market perform" rating on the stock and noted that the company's do-it-yourself operation, which comprises 40 percent of revenue, is struggling.

"Consumers seem to be remaining on the sideline, only spending for repair/remodel that is required rather than larger ticket items."

Also, Universal Forest Products is sensitive to demand by home builders for its lumber, a segment that comprises 20 percent of revenue, Johnson said.

"Current industry housing start forecasts call for on average, another 36 percent decline in 2009 to 580,000 from 906,000 in 2008, suggesting that this market should remain challenging through the year," he said.

In afternoon trading, shares fell $2.59, or 6.3 percent, to $38.53, recovering from a session low of $36.10.