It has been about a month since the last earnings report for Universal Forest Products, Inc.UFPI . Shares have lost about 4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
First-Quarter 2017 Highlights
Universal Forest Products reported in-line results for first-quarter 2017, with earnings of $1.03 per share matching the Zacks Consensus Estimate. However, backed by the company's pro-growth policies, the bottom line grew 8.4% year over year.
The company's net sales of $846.1 million surpassed the Zacks Consensus Estimate of $812.6 million. Also, sales increased 24% the year-ago tally on the back of solid performance in three end market-based segments, namely Retail Building Materials, Industrial, and Housing & Construction.
New products sales improved roughly 15.3% year over year to $74.6 million.
Segmental Details: Universal Forest Products' segmental sales sum up to total gross sales. In the quarter, the company's gross sales totaled $856.8 million, up 23% year over year. A brief snapshot of end-market sales has been provided below:
Retail Building Materials' (36.4% of first-quarter gross sales) revenues of $311.8 million increased 15% year over year on the back of improved businesses from big box customers. Unit sales grew 9% and selling prices went up 6% in the quarter.
Industrial sales (32.4%) were $277.2 million, increasing 37% year over year. The growth was primarily triggered by synergistic benefits from acquisition of idX Corporation (closed in Sep 2016) as well as healthy businesses from new and existing customers.
Housing and Construction sales (31.3%) were $267.8 million, up 21% year over year due to impressive businesses from residential construction and manufactured housing customers.
Margins: In the quarter, Universal Forest Products' margin profile suffered from higher costs and expenses. As a percentage of revenues, the company's cost of sales increased 80 basis points (bps) to 85.7%. Gross margin decreased 80 bps to 14.3%. Selling, general and administrative expenses were roughly $86.9 million, accounting for 10.3% of net sales.
Balance Sheet & Cash Flow: Exiting the first quarter, Universal Forest Products had cash and cash equivalents of $31 million, below $34.1 million recorded in the preceding quarter. Long-term debt surged 131.8% sequentially to approximately $252.9 million.
In the quarter, the company used net cash of $70.7 million for its operating activities, higher than $30 million used in the year-ago quarter. Capital spent on purchase of property, plant and equipment amounted to $16.5 million, up from $12.9 million used in the year-ago period. Shares worth $0.08 million were repurchased in the quarter.
Outlook: For 2017, Universal Forest Products expects an improvement in the top line, backed by addition of customers and products to its portfolio through organic and inorganic means. Also, enhancement of operating margin remains the company's primary area of focus.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
Universal Forest Products, Inc. Price and Consensus
Currently, Universal Forest's stock has a poor score of 'F', on both growth and momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report