Universal Forest (UFPI) Beats Q2 Earnings; '16 View Bright
Building products company Universal Forest Products Inc. UFPI kept its earnings streak alive in second-quarter 2016. The company’s earnings came in at $1.64 per share, exceeding the Zacks Consensus Estimate of $1.44 by 13.9%. Also, the bottom line was way above the year-ago tally of $1.28.
Talking of the top line, Universal Forest Products’ net sales were $872.1 million in the quarter, up 4% year over year. The improvement was driven by solid performance in the retail and construction markets. New products sales improved 9.2% year over year.
However, the top line lagged the Zacks Consensus Estimate of $906 million.
Segmental Details
Universal Forest Products’ segmental sales sum up to total gross sales (net sales including sales allowances). In the quarter, the company’s gross sales totaled $887.4 million, up 4% year over year.
The three end market-based segments, namely, Retail Building Materials, Industrial, and Housing & Construction, represented approximately 46%, 26% and 28%, respectively, of the total gross sales. A brief snapshot of Universal Forest Products’ end-market sales has been provided below:
Retail Building Materials revenues of $406.7 million increased 8% year over year on the back of improved businesses from big box and independent retail customers.
Industrial sales were recorded at $231.4 million, down 3% year over year. The fall was primarily triggered by adverse impacts of a strengthening U.S. dollar and lower industrial production in the U.S.
Sales in the Housing and Construction end-markets were $249.3 million, up 6% year over year due to impressive businesses from commercial and residential construction customers.
Margins
In the quarter, Universal Forest Products’ margin performance improved year over year. As a percentage of revenues, cost of sales decreased 170 basis points (bps) to 84.9%. Gross margin improved 170 bps to 15.1%. Selling, general and administrative expenses were roughly $77.8 million, accounting for 8.9% of net sales.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Universal Forest Products had cash and cash equivalents of $87.5 million, significantly up from $43.1 million recorded in the preceding quarter. Long-term debt remained roughly stable at $84.5 million.
In the first half of 2016, Universal Forest Products generated net cash of $40 million compared with $36.8 million generated a year ago.. Capital spent on purchase of property, plant and equipment amounted to $24.3 million down from $27.8 million used in first-half 2015. Dividend payment totaled $8.5 million.
Outlook: For 2016, Universal Forest Products expects an improvement in the top line, backed by addition of customers and products to its portfolio. Also, enhancement of operating margin remains the company’s primary area of focus.
Universal Forest Products anticipates improving its retail business on higher demand for building products while predicts organic and inorganic expansion initiatives and rise in market share will boost performances of its industrial business. In addition, the construction business will benefit from the strengthening U.S. housing market and rise in commercial construction spending.
UNIVL FST PRODS Price, Consensus and EPS Surprise
UNIVL FST PRODS Price, Consensus and EPS Surprise | UNIVL FST PRODS Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $2.1 billion, Universal Forest Products carries a Zacks Rank #3 (Hold). Currently, investors interested in the building products industry can consider stocks like Louisiana-Pacific Corp. LPX, Potlatch Corporation PCH and Weyerhaeuser Co. WY. While Louisiana-Pacific sports a Zacks Rank #1 (Strong Buy), both Potlatch Corporation and Weyerhaeuser carry a Zacks Rank #2 (Buy).
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