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Universal's Wolverine Wood Products Buyout to Boost Capacity

Zacks Equity Research

One of the affiliates of Universal Forest Products, Inc. UFPI has inked a deal to acquire the operating assets of Wolverine Wood Products, Inc. However, financial terms of the deal were not disclosed.

Wolverine Wood Products, which manufactures wood panel components for furniture, store fixtures and case goods, will boost the capacity of Universal to produce value-added wood components in the Midwest.

With the help of automation and robotics, Wolverine Wood Products has become one of the fastest growing companies in the industry. It aims to achieve annual sales of $5 million in the future.

Acquisitions have been one of the key components of Universal's improved performance over the past several years. The company has been solidifying its product portfolio and leveraging new business opportunities with these buyouts. It has closed six acquisitions in the last three quarters and has plans for more buyouts in the forthcoming quarters. Notably, in the first nine months of 2018, acquisitions added approximately $125 million to total net sales and $7 million to its gross profit.

Universal purchased North American Container Corporation on Jun 4, 2018, thereby fortifying its product portfolio and customer base by bringing corrugated, steel and hardwood packaging solutions under one roof. Also, the buyout has enabled the company to penetrate into growth markets and improve technological expertise.

Additionally, the company bought Spinner Wood Products and Great Northern Lumber in January 2018, and Expert Packaging and Fontana Wood Products later in April 2018. These buyouts are anticipated to collectively generate revenues of $50 million on an annual basis.



Meanwhile, shares of Universal have outperformed the Zacks Building Products – Wood industry in the past three months. The stock has gained 15.8%, comparing favorably with its industry’s growth of 1.5% in the said period. Earnings estimates for 2019 have also moved north over the past seven days, depicting analysts’ optimism surrounding the company’s bottom-line growth potential.

Zacks Rank & Key Picks

Currently, Universal carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Construction sector include Gibraltar Industries, Inc. ROCK, Comfort Systems USA, Inc. FIX and Orion Energy Systems, Inc. OESX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gibraltar’s 2019 earnings are expected to increase 17.2%.

Comfort Systems’ earnings for the current quarter are likely to grow 84.4%.

Orion’s earnings are projected to grow 31.6% in fiscal 2019.

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