UFP Technologies, Inc. UFPT currently seems to be a smart choice for investors seeking exposure in the containers (paper and packaging) space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This Newburyport, MA-based company currently sports a Zacks Rank #1 (Strong Buy). It belongs to the Zacks Containers – Paper and Packaging industry, currently placed in the top 7% (with Zacks Industry Rank #19) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.
We believe that exposure in consumer-oriented end markets, improvement in purchasing power in Asia, rise in demand for sophisticated packaging and growth in the e-commerce business are beneficial for the industry players.
Below we discussed why investing in UFP Technologies will be a smart choice.
Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of the company over time. In the past year, UFP Technologies’ share price has gained 28.5% compared with the industry’s growth of 7.4%.
It is worth mentioning here that the company’s shares have gained 11.4% since the release of first-quarter 2019 results on May 7, 2019. Its quarterly earnings of 50 cents surpassed the Zacks Consensus Estimate of 40 cents by 25%. Average earnings surprise for the last four quarters was 9.14%.
Contract wins, new internal growth opportunities and synergistic gains from acquired assets will be beneficial for the company going forward.
In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about UFP Technologies’ growth prospects. Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $2.22 for 2019 and $2.73 for 2020, suggesting growth of 4.2% and 3% from the respective 60-day-ago figures. In addition, earnings estimates for the second quarter of 2019 remained unchanged at 56 cents.
UFP Technologies, Inc. Price and Consensus
UFP Technologies, Inc. price-consensus-chart | UFP Technologies, Inc. Quote
Over three to five years, the company anticipates gross margin to be 27-28% and operating margins to be 11-13%.
Strengthening End Markets: UFP Technologies serves customers primarily in the electronics, automotive, industrial, aerospace & defense, and consumer end markets. For the medical market (the largest revenue generator for the company), it stands to gain from expertise in providing components solutions for invasive surgery, orthopedics, wound care and infection prevention. Aging population is boosting demand for products in this market.
In one hand, the company’s material expertise, product & material diversity, expertise in design engineering, precision compression molding, and die cutting capabilities in the automotive market will be boons. On the other hand, expertise in acoustic insulation, uniforms & tactical gear, comfort & safety components, and others are proving beneficial in the aerospace & defense market. Rise in demand for lighter and safer aircraft is growth booster in the aerospace market.
In three to five years, the company anticipates revenues to gain 10-14%, including 5-7% from organic growth.
Buyouts: UFP Technologies seems to favor acquisitions to fortify the product portfolio. In three to five years, the company anticipates synergistic gains from acquired assets to boost revenues by 5-7%.
Dielectrics Inc., acquired by the company in 2018, has been strengthening UFP Technologies’ medical business and boosting profitability. Dielectrics is engaged in designing and producing medical devices, with thermoplastic materials as the main content. No buyouts were made in the first quarter of 2019.
Debt Profile: UFP Technologies’ long-term debts were $19.3 million at the end of the first quarter of 2019, reflecting a sequential decline of 13.5%. The company’s debt profile is better than the industry. Its long-term debt/capital of 13.2% is lower than the industry’s 62.4%.
Other Key Picks
Some other top-ranked stocks in the Zacks Industrial Products sector are AptarGroup, Inc. ATR, Graphic Packaging Holding Company GPK and Chart Industries, Inc. GTLS. While AptarGroup sport a Zacks Rank #1, both Graphic Packaging and Chart Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for AptarGroup and Chart Industries have improved for the current year while remained unchanged for Graphic Packaging. Further, average earnings surprise for the last four quarters was 8.27% for AptarGroup, 3.93% for Graphic Packaging and 16.56% for Chart Industries.
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