Universal Forest: An Attractive Stock to Own - Analyst Blog
Zacks Investment Research provided a Zacks Rank #2 (Buy) to
Universal Forest Products Inc.
) on Mar 6, 2014. Going by the Zacks model, the company has
higher chances of performing better than the broader market and
is an attractive investment option for investors seeking exposure
in the building materials industry.
Why Zacks Rank #2?
Year to date, Universal Forest Products Inc. has provided a solid return of 39.7% while its earnings are expected to grow 10.0% in the next 5 years, much higher than 6.9% expected for the industry. The company reported its fourth-quarter 2013 results on Feb 12 and ever since its shares have risen 14.8%.
A brief discussion on Universal Forest Products' fourth-quarter 2013 results is provided below:
Universal Forest Products Inc. reported earnings per share of 40 cents, a remarkable improvement over the loss of 10 cents recorded in the year-ago quarter and above the Zacks Consensus Estimate of 18 cents. Results were driven by improvement in the housing and construction markets, benefits from new product introductions and strong industrial activities.
Net sales in the quarter were $525.7 million, up 11.7% year over year due primarily to healthy performances at Universal Forest Products' 5 market segments. Unit sales increased 5% while selling prices were up by 7%. Gross margin improved by 280 basis points year over year to 12.2%.
Subsequent to the earnings release, Universal Forest Products Inc. announced two distribution agreements. The first agreement requires the company's subsidiary, Boise Cascade Building Materials Distribution, to distribute Latitudes Decking & Railing products and accessories as well as Deckorators CXT Railing Systems. The second agreement is for the distribution of CAMO Hidden Deck Fastening System.
Strong fourth-quarter 2013 results and the above-mentioned distribution agreements along with a positive average earnings surprise of 661.7% make us optimistic of better results in the quarters ahead. In the last 30 days, the Zacks Consensus Estimate has increased by 5.8% to $3.30 for 2014 and 5.6% to $4.18 for 2015. These estimates reflect year-over-year growth of 55.7% for 2014 and 26.5% for 2015.
Other Stocks to Consider
Universal Forest Products Inc. manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products. The company currently has a market capitalization of $1.14 billion. Some other stocks worth considering in the industry include Potlatch Corporation ( PCH ), Weyerhaeuser Co. ( WY ) and USG Corporation ( USG ), all of which hold a Zacks Rank #2 (Buy).
POTLATCH CORP (PCH): Free Stock Analysis Report
UNIVL FST PRODS (UFPI): Free Stock Analysis Report
USG CORP (USG): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
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