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Universal Forest (UFPI) to Post Q1 Earnings: What's Up?

Zacks Equity Research

Universal Forest Products Inc. UFPI is set to report first-quarter 2019 results on Apr 24, after the closing bell.

Notably, it has been generating improved earnings and revenues over the last few quarters. In the last reported quarter, the company’s adjusted earnings of 55 cents increased 34.1% from the year-ago level of 41 cents.

Its fourth-quarter sales also grew 2% from the year-ago period. The upside was mainly attributable to improved product mix, solid operating margins and operating efficiencies. In fact, it came up with record sales in the fourth quarter for the 14th time in a row.

Shares of Universal Forest have outperformed its industry in the past six months. The company’s shares have gained 8.3% compared with its industry’s growth of 5.3% in the said period. Earnings estimates for the to-be-reported quarter have moved 4% upward over the past 60 days, raising optimism surrounding the stock.

Universal Forest Products, Inc. Price and EPS Surprise

Universal Forest Products, Inc. Price and EPS Surprise | Universal Forest Products, Inc. Quote

Let’s See How Things are Shaping Up for This Announcement

Universal Forest's first-quarter results are expected to benefit from buyout strategies, and increased demand for repair and remodeling activities.

The company has been solidifying its product portfolio and identifying new business opportunities through strategic buyouts. In fourth-quarter 2018, the company closed the acquisition of Pak-Rite, a mixed materials packaging and manufacturing company. The acquisition has helped it to increase its packaging products portfolio and boost presence, which will ultimately aid top-line performance in the quarter to be reported.

Apart from strong inorganic moves, the company is poised to benefit from rising demand for repair and remodeling activities in the first quarter.

Continuous efforts to introduce new products will likely give a boost to its performance in the to-be-reported quarter. The company remains confident of the expansion of its portfolio of Deckorators brand products. Also, it is expanding UFP-Edge product offerings via higher-quality coatings, and smooth and rough surfaces, which are expected to enhance its performance.

However, higher transportation costs have been pressurizing margins over the last few quarters. Shortage of trucks and drivers during peak delivery times led to the increase in costs. Also, lumber market headwinds have been dampening the company’s bottom-line performance. The above-mentioned factors are expected to partially pressurize its margins in first-quarter 2019.

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for Universal Forest’s Q1 earnings is pegged at 51 cents per share, indicating an increase of 13.3% from the prior-year reported figure.

Its revenues are likely to decline 3.1% from the prior-year quarter to $963.2 million.

Here is What Our Quantitative Model Predicts:

Our proven model shows that Universal Forest is unlikely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Universal Forest currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Apergy Corporation APY has an Earnings ESP of +0.81% and a Zacks Rank #1.

Construction Partners, Inc. ROAD has an Earnings ESP of +52.38% and a Zacks Rank #2.

D.R. Horton, Inc. DHI has an Earnings ESP of +0.52% and a Zacks Rank #3.

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