We recently upgraded our recommendation on Universal Forest Products, Inc. (UFPI) from Neutral to Outperform, anticipating the company to perform better than the broader market.
Well positioned in the lumber supply chain, Universal Forest Products offers strong growth opportunities. Top-line growth through additions of new customers and products are the company’s prime area of focus. Revenue generation is targeted to reach $3 billion with operating margins at normal historical levels by 2017.
Universal Forest Products, year-to-date, has provided returns of 26.3%.
Universal Forest Products’ third quarter 2013 financial results clearly depict the company’s strong positioning in end markets and its bright future prospects. Earnings per share in the quarter more than doubled year-over-year while revenues increased by 22% on the back of healthy performances at the five market segments. Cash position was strong and long-term debt balance was down 40.6% sequentially.
Also recently, Universal Forest Products increased its quarterly dividend rate by 5% which is consistent with the company’s policy of rewarding its shareholders. Also, expansion through development of industrial business, entry into markets without adding capacities and accretive acquisitions are being carried out. Addition of SE Panel assets in Nov 2013 will enable the company to gain easy access to concrete forming and construction industries of the southeastern region of the United States.
In the last 30 days, the Zacks Consensus Estimate for Universal Forest Products has gone up by 5.7% to $1.84 for 2013 and increased by 18.6% to $3.12 for 2014. Also, we have an Earnings ESP of +17.7% for the fourth quarter 2013 and roughly +6.0% for 2013. Expected long-term earnings growth rate for the company is 10.0%.
Other Stocks to Consider
Universal Forest currently has a market capitalization of $1.02 billion. Other stocks to watch out for in the industry are Boise Cascade Company (BCC), Rayonier Inc. (RYN) and Builders FirstSource, Inc. (BLDR) each carrying a Zacks Rank #2 (Buy).