Zacks_Analysts' Blog : UFPI Upgraded to Neutral - Analyst Blog

We recently upgraded our recommendation for Michigan-based Universal Forest Products Inc.(UFPI) from Underperform to a Neutral rating.

Despite far reaching effects on businesses worldwide due to the recent global economic meltdown, Universal Forest is making constant efforts to align its cost with business activities. Of late, the company undertook stringent economic measures that are likely to save approximately $10 million annually for the company. Moreover, to combat the weak operating environment, the company’s focus on new products, business diversification and new customer additions are worth appreciating.

Going forward, the company looks forward to better results for its Retail building material unit. Also, the Industrial packaging unit continues to add new customers and remains focused on expanding its non-wood packaging materials. The Manufactured housing businesses benefit from the addition of products and expansion of distribution capacities. The Residential Construction business is also gaining from the company’s multifamily and government projects, while the Commercial Construction and Concrete Forming business is winning markets through its extensive focus on business expansion.

The company in the third quarter 2011 reported a 123% year-over-year increase in earnings per share that overshadowed the 2.4% year-over-year decline in revenue.

Zacks Consensus Estimates for the fiscal years 2011 and 2012 stand at 27 cents and $1.08, representing a year-over-year decline of 64.47% and growth of 299.07%, respectively.

The Michigan-based company primarily engineers, manufacturers, treats, distributes, and installs lumber, composite wood, plastic and other building products for its do-it-yourself (DIY), site-built construction (homebuilders), manufactured housing, and industrial markets. The company faces stiff competition from players like Bluelinx Holdings Inc. (BXC), Builders FirstSource Inc. (BLDR) and Louisiana-Pacific Corp. (LPX).