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UFPI's 4Q Lags Estimate

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Universal Forest Products Inc’s (UFPI) fourth quarter 2012 financial results were disappointing as the company reported a net loss of 10 cents per share compared with a loss of 9 cents reported in the year-ago quarter. The results were far below the Zacks Consensus Estimate of 2 cents per share earnings.

For 2012, the company reported net earnings of $1.21 per share, up from 23 cents in 2011 and the Zacks Consensus Estimate of $1.20.


Net sales in the fourth quarter were $470.8 million, up 11.5% year over year due to a healthy growth witnessed in the lumber market, which helped overcome a 2% decline in unit sales. Revenue results in end-markets were strong, except for a 3.5% decline experienced in the Retail Building Materials market. Revenue detail of each market is discussed below:

Retail Building Materials revenue (33% of fourth quarter total gross sales) was down 3.5% year over year to $159.5 million. Residential Construction sales (16%) improved     60.5% to $74.6 million. Commercial Construction and Concrete Forming sales (5%) were $22.1 million, up 4.6% year over year.

Industrial packaging/components sales (29%) were $139.2 million, up 8.3% year over year. Manufactured Housing sales (17%) were up 20.9% year over year to $81.3 million.

For 2012, revenue came in at $2,054.9 million, up 12.8% year over year.


In the fourth quarter, Universal Forest’s cost of goods sold represented 90.6% of total revenue, up 180 basis points year over year while gross margin decreased by the same magnitude to settle at 9.4%. Selling, general and administrative expenses were roughly $44.8 million and accounted for 9.5% of total revenue.
Balance Sheet

Universal Forest’s cash and cash equivalents roughly tripled sequentially to $14.5 million exiting the fourth quarter of 2012 as against $4.9 million in the previous quarter. Long-term debt balance came in at $95.8 million versus $16.7 million reported in the sequential quarter as debt borrowings far exceeded repayments during the quarter.

Cash Flow

In 2012, cash flow from operating activities entered a negative zone and stood at ($5.7) million versus $11.5 million in 2011. Capital spending also slipped, though by 7.9% year over year, to $30.3 million.
Going forward, management anticipates improving its top-line growth through additions of new customers and products to its portfolio. Also, operating margin enhancement remains a prime area of focus for the company.

Universal Forest Products Inc. manufactures, treats, distributes, and installs lumber, composite wood, plastic and other building products.

The stock currently has a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Louisiana-Pacific Corp. (LPX) with a Zacks Rank #1 (Strong Buy) while Builders FirstSource, Inc. (BLDR) and Lowe's Companies Inc. (LOW), each has a Zacks Rank #2 (Buy).

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