Universal Forest (UFPI) Q4 Earnings Up Y/Y, Costs Escalate

Universal Forest Products, Inc. (NASDAQ:UFPI) reported improved year-over-year results for the fourth quarter of 2017.

Net earnings in the quarter were 51 cents per share, up 50% over the year-ago tally of 34 cents. Excluding the benefits from changes in the corporate taxes, the bottom line in the fourth quarter came in at 41 cents.

Results were driven by healthy sales growth in three segments, partially offset by higher cost of sales and operating expenses.

For 2017, the company’s net earnings were $1.94 per share, increasing 18% year over year.

Revenues Gain From Segmental Performance

Universal Forest Products’ net sales in the fourth quarter were $966.1 million, reflecting year-over-year growth of 12.4%. The improvement was primarily driven by a healthy segmental performance.

Of this year-over-year upswing, roughly 5% came from growth in unit sales and 8% from favorable pricing.

The company’s segmental sales sum up to total gross sales. In the fourth quarter, the company’s gross sales totaled $981.5 million, up 13% year over year. A brief snapshot of end-market sales has been provided below:

Retail Building Materials (33.7% of fourth-quarter gross sales): The segment’s sales totaled $330.6 million, recording a 20% increase year over year. Unit sales grew 13%, while favorable pricing contributed 7% to sales growth. Of these, acquired assets benefitted by 10%.

Industrial (35.2%): Sales in this segment grew 9% to $345.1 million on the back of 7% gain from favorable pricing and 2% from growth in unit sales.

Housing and Construction (31.2%): This segment’s sales were recorded around $305.8 million, up 10% year over year on the back of favorable pricing. Though business was strong in the manufactured housing market, the commercial and residential construction business remained dismal.

For 2017, the company’s net sales increased 21.6% year over year to $3,941.2 million. New product sales in the year were $418.4 million, up 23.5% year over year.

Margin Profile Mixed

In the quarter, Universal Forest Products’ cost of sales climbed 13.5% year over year to $836.9 million. It represented 86.6% of the quarter’s net sales, an increase from 85.8% in the year-ago quarter. Gross margin contracted 80 basis points (bps) to 13.4%.

Selling, general and administrative expenses of $87.8 million grew 0.9% year over year and represented 9.1% of net sales. Operating margin expanded 20 bps to 4.3%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, Universal Forest Products’ cash and cash equivalents were roughly $28.3 million, up from $22 million at previous quarter-end. Long-term debt edged down 0.8% sequentially to $144.7 million.

In 2017, the company generated $136.6 million net cash from its operating activities, decreasing 20.8% from the previous year. Capital spent on the purchase of property, plant and equipment totaled at $71.1 million versus $53.8 million in 2016. Shares worth $13 million were repurchased, while the dividend of $19.6 million was distributed in the year.

Universal Forest Products, Inc. Price, Consensus and EPS Surprise