Why Is SEI Investments (SEIC) Down 5.3% Since Its Last Earnings Report?
Universal Forest Products, Inc. UFPI reported better-than-expected results for the first quarter of 2018, exceeding the earnings and revenue estimates by 7.1% and 5%, respectively. The quarter’s revenue and earnings results set a record for the company for the eleventh time in a row.
As reported, net earnings in the quarter were 53 cents per share. Excluding 8 cents gain from the Medley asset sale, earnings in the quarter were 45 cents, up 32.4% year over year and above the Zacks Consensus Estimate of 42 cents.
Results were driven by healthy sales growth in three segments, partially offset by higher cost of sales and operating expenses.
Segmental Performance Drives Net Sales
In the quarter, Universal Forest Products’ net sales were approximately $993.9 million, reflecting year-over-year growth of 17%. The improvement was primarily driven by a healthy segmental performance.
Also, the top line surpassed the Zacks Consensus Estimate of $946.6 million.
The company’s segmental sales sum up to total gross sales. In the first quarter, gross sales totaled $1,011.7 million, rising 18% above the year-ago tally. Of the year-over-year growth, roughly 9% came from growth in unit sales — including 5% from organic sales and 4% from acquired assets — and 9% from favorable pricing.
A brief snapshot of end-market gross-sales has been provided below:
Retail Building Materials (36.7% of first-quarter gross sales): The segment’s sales grew roughly 19% year over year to $371 million. Unit sales grew 10% while favorable pricing contributed 9% to sales growth. Of the unit sales growth, acquired assets accounted for 7% and organic sales of roughly 3%.
Industrial (32.9%): The segment’s sales totaled $333 million, reflecting growth of 19% over the year-ago period. Unit sales grew 11% while favorable pricing contributed 8% to sales growth. Of the unit sales growth, acquired assets accounted for 4% and organic sales of roughly 7%.
Housing and Construction (30.4%): This segment’s sales totaled $307.7 million, up 16% year over year. The improvement came on the back of 10% gain from favorable pricing and 6% from growth in unit sales, driven by organic activities.
Business was strong in the manufactured housing, commercial and residential construction markets with year-over-year sales growth of 24%, 18% and 7%, respectively.
Margin Profile Mixed
In the quarter, Universal Forest Products’ cost of sales increased 19% year over year to $863 million, representing 86.8% of net sales versus 85.7% in the year-ago quarter. Gross profit grew 8.4% year over year but as a percentage of net sales fell 110 basis points (bps) to 13.2%.
Selling, general and administrative expenses of $93.2 million grew 7% year over year and represented 9.4% of net sales. Operating margin inched up 40 bps to 4.4%.
Balance Sheet & Cash Flow
Exiting the first quarter, Universal Forest Products had cash and cash equivalents of $25.3 million, below $28.3 million at previous quarter-end. Long-term debt surged 80.6% sequentially to $261.3 million.
In the quarter, the company used cash of $84.2 million for operating activities, up 18.8% from $70.8 million used in the year-ago quarter. Capital spent on the purchase of property, plant and equipment totaled $24.4 million versus $16.5 million in the year-ago quarter. Also, the company used roughly $0.8 million for repurchasing common shares in the quarter.
In the quarters ahead, Universal Forest Products anticipates gaining from the existing product portfolio, efforts to introduce new products and initiatives to better production efficiency. Also, the industrial market offers solid growth opportunities, which the company plans to leverage through organic and inorganic means.
Also, the company’s acquisitive nature is anticipated to be advantageous. The company acquired Spinner Wood Products and Great Northern Lumber in January while buying Expert Packaging and Fontana Wood Products in April. These buyouts are anticipated to collectively generate revenues of $50 million, annually. Additionally, it predicts completing the buyout of North American Container Corporation on Jun 1, 2018. This acquisition will bring corrugated, steel and hardwood packaging solutions under one roof and enable the company to penetrate into growth markets and improve its technological expertise.
Universal Forest Products, Inc. Price, Consensus and EPS Surprise
Universal Forest Products, Inc. Price, Consensus and EPS Surprise | Universal Forest Products, Inc. Quote
Zacks Rank & Other Stocks to Consider
Universal Forest Products, with a market capitalization of approximately $2.1 billion, currently carries a Zacks Rank #2 (Buy).
Other stocks worth considering in the industry are Boise Cascade Company BCC, Louisiana-Pacific Corporation LPX and Trex Company, Inc. TREX.
Boise Cascade is expected to release first-quarter 2018 results on May 2, 2018. It currently sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +27.61%. Per our in-house model, stocks -- having a combination of favorable Zacks Rank #1, 2 or 3 (Hold) and a positive Earnings ESP -- have higher chances of surpassing estimates in the quarter.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific currently sports a Zacks Rank #1. It is slated to report first-quarter 2018 results on May 7, before the market opens. Its Earnings ESP for the quarter is +15.79%.
Trex Company currently sports a Zacks Rank #2. It is slated to report first-quarter 2018 results on May 7, after the market closes. Its Earnings ESP for the quarter is 0%.
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