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UFP Industries (UFPI) Q2 Earnings & Sales Beat, Rise Y/Y

·5 min read

Shares of UFP Industries, Inc. UFPI moved up 2.71% in the after-hours trading session on Jul 21 after it reported stellar second-quarter 2022 results. Both earnings and net sales beat the Zacks Consensus Estimate and increased on a year-over-year basis.

Matthew J. Missad, CEO of UFP Industries, said, “Our construction and industrial business segments performed very well, and our retail segment, which is most adversely impacted by rapidly falling lumber prices, managed this challenge and is well-positioned for the rest of 2022 with the expected stabilization of lumber prices.”

Earnings & Revenue Discussion

UFP Industries’ quarterly earnings came in at $3.23 per share, which comfortably surpassed the consensus mark of $2.25 by 43.6% and increased 16% from the year-ago level of $2.78.

UFP Industries, Inc. Price, Consensus and EPS Surprise

 

UFP Industries, Inc. Price, Consensus and EPS Surprise
UFP Industries, Inc. Price, Consensus and EPS Surprise

UFP Industries, Inc. price-consensus-eps-surprise-chart | UFP Industries, Inc. Quote

 

Net sales of $2.9 billion outpaced the consensus mark of $2.36 billion by 22.9% and rose 7% year over year. The growth is attributable to a 2% rise in organic unit sales, a 1% increase in unit sales from buyouts and a 4% boost in lumber price.

New product sales were $181 million, up 37% year over year, driven by the recent buyouts.

Segment Discussion

UFP Retail Solutions: The segment reported sales of $1.12 billion for the quarter, which fell 11% year over year as organic unit sales declined 5%. A 5% drop in selling price and a 2% decline due to the transfer of certain sales to the construction segment were offset by a 1% contribution from acquisitions.

UFP Industrial: The Industrial segment’s sales totaled $676 million, reflecting growth of 11% from the year-ago period. For the quarter, selling prices increased 11% year over year and acquisitions contributed 1%. Meanwhile, organic unit sales dropped 1% from the prior-year quarter.

UFP Construction: Sales in the segment were $975 million, up 32% year over year. This improvement in the segment sales is mainly attributable to a 15% increase in selling price, an 15% rise in organic unit growth and 2% growth from the transfer of certain sales from the retail segment.

Operating Highlights

Selling, general and administrative expenses — accounting for 7.4% of net sales — improved 60 basis points (bps) year over year. Adjusted EBITDA of $318.5 million increased 22% year over year. Adjusted EBITDA margin also expanded 130 bps from the prior year to 11%.

Guidance

UFPI expects its balanced business model and operational improvements will continue to help it navigate new challenges like rising interest rates and historically high inflation. In the near term, it expects more normalized demand in its largest segment — retail solutions — but year-over-year improvement in the third quarter. In the industrial segment, pricing remains healthy as it passes through inflationary costs and benefits from the focus on value-added products. In the construction segment, it witnesses continued activity in commercial and infrastructure end markets but softening the housing market. The diversified business and end markets will likely deliver good returns to shareholders.

Balance Sheet & Cash Flow

The company ended the second quarter with $1.6 billion in liquidity as of Jun 25. Cash and cash equivalents were $138 million at quarter-end compared with $44.3 million at 2021-end. For the quarter, net cash from operating activities was $90.4 million versus $115.7 million in the corresponding year-ago period.

UFP Industries expects capital expenditures within $175-225 million for 2022, indicating an increase from $151 million spent in 2021. During the first six months of 2022, capital expenditures totaled $72 million.

From February to June, UFPI purchased approximately 1,210,000 shares at an average price of $77.06 under the share repurchase plan. Also, it issued 913,000 shares so far in 2022 at an average issue price of $82.71 per share for share-based compensation programs.

Zacks Rank

Currently, UFP Industries carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Better-Ranked Construction Stocks to Buy

KBR, Inc. KBR, currently carrying a Zacks Rank #1, provides scientific, technology and engineering solutions to governments and commercial customers. Its mission-critical government services, high-end and differentiated government business work, strong margin performance, proprietary technology solutions and a significant increase in backlog (particularly in Government Solution) are expected to boost 2022 earnings.

KBR’s 2022 earnings are likely to rise 7.9%. The company’s earnings estimates have remained stable over the past 60 days.

Primoris Services Corporation PRIM, currently carrying a Zacks Rank #1, provides a wide range of construction, fabrication, maintenance, replacement and engineering services.

PRIM’s 2022 earnings are likely to rise 21.7%. The company’s earnings estimates have increased to $2.64 from $2.59 per share over the past seven days.

Toll Brothers Inc. TOL, currently carrying a Zacks Rank #2 (Buy), mostly offers luxury homes and its communities are located in prosperous suburban areas with easy access to major cities.

TOL’s expected earnings growth rate for fiscal 2022 is 53.2%. The consensus mark for its fiscal 2022 earnings has moved up to $10.16 from $9.87 per share in the past 60 days.


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