Yahoo Finance UFP (NASDAQ:UFPI) Surprises With Q2 Sales
Multi-industry wood and non-wood products manufacturer UFP Industries (NASDAQ:UFPI) reported Q2 CY2024 results beating Wall Street analysts' expectations , with revenue down 6.9% year on year to $1.90 billion. It made a GAAP profit of $2.05 per share, down from its profit of $2.36 per share in the same quarter last year.
Is now the time to buy UFP? Find out in our full research report.
UFP (UFPI) Q2 CY2024 Highlights:
Revenue: $1.90 billion vs analyst estimates of $1.87 billion (1.6% beat)
EPS: $2.05 vs analyst estimates of $2.03 (1.2% beat)
Gross Margin (GAAP): 19.1%, down from 19.6% in the same quarter last year
Free Cash Flow of $222.2 million is up from -$89.69 million in the previous quarter
Market Capitalization: $7.80 billion
“Our second quarter results were in line with expectations in a more challenging business cycle, and I am grateful for the efforts of all of our UFP teammates to adapt to this environment and adjust capacity to meet demand,” said Chairman and CEO Matthew J. Missad.
Beginning as a lumber supplier in the 1950s, UFP (NASDAQ:UFPI) makes a wide range of building materials for the construction, retail, and industrial sectors
Building Materials
Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Thankfully, UFP's 9.1% annualized revenue growth over the last five years was solid. This shows it was successful in expanding, a useful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. UFP's recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 14.8% over the last two years.
This quarter, UFP's revenue fell 6.9% year on year to $1.90 billion but beat Wall Street's estimates by 1.6%. Looking ahead, Wall Street expects sales to grow 2.3% over the next 12 months, an acceleration from this quarter.
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Operating Margin
UFP has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.5%, higher than the broader industrials sector.
Looking at the trend in its profitability, UFP's annual operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, UFP generated an operating profit margin of 8.4%, down 1.1 percentage points year on year. Since UFP's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
UFP's EPS grew at an astounding 24.1% compounded annual growth rate over the last five years, higher than its 9.1% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into UFP's quality of earnings can give us a better understanding of its performance. As we mentioned earlier, UFP's operating margin declined this quarter but expanded by 2.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For UFP, its two-year annual EPS declines of 14.2% show its recent history was to blame for its underperformance over the last five years. We hope UFP can return to earnings growth in the future.
In Q2, UFP reported EPS at $2.05, down from $2.36 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 1.2%. Over the next 12 months, Wall Street expects UFP to grow its earnings. Analysts are projecting its EPS of $7.73 in the last year to climb by 2.4% to $7.91.
Key Takeaways from UFP's Q2 Results
It was good to see UFP beat analysts' revenue and EPS expectations this quarter. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $127.06 immediately following the results.
So should you invest in UFP right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
