Universal Forest (UFPI) Rides High On Solid Q2 & Prospects

Shares of Universal Forest Products Inc. (NASDAQ:UFPI) reached a new 52-week high of $105.99 on Jul 22, before closing the trading session slightly lower at $105.08. This apex improved upon the last 52-week high of $104.74 on Jul 21.

Universal Forest Products currently offers a year-to-date return of 59.7%. The trading volume for the session was 0.28 million shares. An expected earnings growth rate of 10% for the next five years indicates the scope for further stock price appreciation.

Growth Drivers

Universal Forest Products’ financial performance has been impressive in second-quarter 2016, raising investors’ confidence in the growth prospects of the company. In the recently reported quarter, the company recorded a positive earnings surprise of 13.9% as its earnings of $1.64 per share exceeded the Zacks Consensus Estimate of $1.44. The company’s top line improved on the back of solid performance in the retail and construction markets as well as rise in new products sales.

For 2016, Universal Forest Products expects an improvement in the top line, backed by addition of new customers and products to its portfolio. The company anticipates improving its retail business on higher demand for building products while it expects organic and inorganic expansion initiatives and rise in market share to boost the performance of its industrial business. In addition, the construction business will benefit from the strengthening U.S. housing market and rise in commercial construction spending. Also, enhancement of operating margin remains Universal Forest Products’ primary area of focus.

In addition, Universal Forest Products anticipates gaining from its inorganic growth initiatives. The company believes that acquisition of Idaho Western and certain assets of Robbins Manufacturing Co. will boost its revenues by $100 million annually.

Over the last 30 days, the Zacks Consensus Estimate for Universal Forest Products remained stable at $4.53 per share for 2016 and at $4.86 for 2017, reflecting year-over-year growth of 13.4% and 7.3%, respectively.