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Universal Forest Products Buys Northwest Painting's Assets

Zacks Equity Research

Universal Forest Products, Inc. UFPI recently declared that one of its affiliates has acquired the operating assets of Northwest Paintings Inc and its affiliates. The acquired affiliates of Northwest Paintings are Northwest Factory Finishes in Bonner, MT and Pacific Northwest Factory Finishes in White City, OR.  

Northwest Painting, with an anticipated annual sale of $14 million, is a leading supplier of pre-painted building materials. Notably, the merger will enable Universal Forest Products to expand its capacity to produce value-added siding and trim for customers in Northwest and Mountain West regions. Additionally, with the acquisition, the company will be able to strengthen its position in the Northwest markets.

The company has been gaining from improving U.S. construction market as well as solid demand for repair and remodeling activities. Backed by synergies from acquisitions and product innovation, shares of Universal Forest Products have surged 50% so far this year compared with the industry's growth of 17.1%.


Acquisitions — A Key Growth Strategy

Acquisitions have been Universal Forest Products’ preferred mode of strengthening product portfolio and leveraging new business opportunities. On May 1, 2019, the company closed the acquisition of Wolverine Wood Products. On Oct 22, 2018, it completed the buyout of Pak-Rite, a mixed materials packaging and manufacturing company.

In 2018, the company acquired Spinner Wood Products and Great Northern Lumber in January, Expert Packaging and Fontana Wood Products in April and North American Container Corporation in June.

These buyouts are anticipated to collectively generate additional revenues, going forward. Apart from adding businesses to its portfolio, the company believes in disposing non-core assets. Aiming operational efficiency and best use of its resources, the company divested its Medley, FL-based property in January 2018.

Our Take

We believe that consistent acquisitions will enable Universal Forest Products to strengthen its top line in the quarters to come. Overall, acquisitions contributed 1% and 3% to total unit sales growth in the second and the first quarter of 2019, respectively. Notably, during the second quarter, acquisitions contributed 6% to unit sales growth in the Industrial market.

Zacks Rank & Other Stocks to Consider

Universal Forest Products currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Construction sector include Boise Cascade BCC, M.D.C. Holdings MDC and Meritage Corporation MTH, each sporting a  Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS for Boise Cascade is expected to increase 7.9%.

M.D.C. Holdings and Meritage Corporation’s trailing four months average earnings surprises are 2.6% and 13.5%, respectively.

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