February 12, 2025

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UFPI) Vs Other Building Materials Stocks

UFPI) Vs Other Building Materials Stocks

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how UFP (NASDAQ:UFPI) and the rest of the building materials stocks fared in Q2.

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.

The 9 building materials stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.5% while next quarter’s revenue guidance was 2.9% above.

The Fed cut its policy rate by 50bps (half a percent) in September 2024, the first in roughly four years. This marks the end of its most pointed inflation-busting campaign since the 1980s. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be assessing whether this rate cut’s timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.

Luckily, building materials stocks have performed well with share prices up 17.6% on average since the latest earnings results.

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

UFP reported revenues of $1.90 billion, down 6.9% year on year. This print exceeded analysts’ expectations by 1.6%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ volume estimates and a decent beat of analysts’ operating margin estimates.

“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.

UFP Total Revenue
UFP Total Revenue

UFP delivered the slowest revenue growth of the whole group. Interestingly, the stock is up 7% since reporting and currently trades at $136.

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