Universal Forest Buys 50% Stake in Upshur Forest - Analyst Blog

Shares of Universal Forest Products, Inc. UFPI, an active player in the lumber supply chain, gained 2.92% as the company announced the acquisition of a 50% stake in Upshur Forest Products, LLC on Mar 31, 2014.

The acquisition was carried out by a subsidiary of Universal Forest Products and consummated on Mar 27, 2014. Financial terms of the transaction were not disclosed.

Upshur Forest Products' sawmills operations in Texas will be a growth booster for Universal Forest Products' industrial business in the region. The company will be in a better position to expand its customer base in East Texas and western Louisiana by offering varied products and services. Roughly $10 million in revenues are anticipated by 2015.

Universal Forest Products' industrial business consists of packaging, crating and other products for manufacturers, accounting for roughly 28% of total revenue in 2013.

Prior to this acquisition, Universal Forest Products, through one of its subsidiaries, had acquired some assets of Container Systems, Inc. on Mar 17. The latter specializes in manufacturing crates and containers for industrial applications and the moving-and-storage industry.

We believe Universal Forest Products has compelling long-term growth prospects. The company looks to boost its top-line growth through accretive acquisitions and addition of new customers and products to its portfolio. Revenue generation is targeted to reach $3 billion with operating margins at normal historical levels by 2017.

The Zacks Consensus Estimate for Universal Forest Products is currently pegged at $3.30 per share and $4.18 per share for 2014 and 2015, respectively. In the next 5 years, earnings are estimated to grow 10.0%, compared with 6.4% predicted for the industry.

Universal Forest Products currently has a market capitalization of $1.1 billion and carries a Zacks Rank #1 (Strong Buy). Stocks to watch out for in the sector are Stock Building Supply Holdings, Inc. STCK, CaesarStone Sdot-Yam Ltd. CSTE and United Rentals, Inc. URI. While Stock Building Supply Holdings and CaesarStone Sdot-Yam carry the same rank as Universal Forest Products, United Rentals holds a Zacks Rank #2 (Buy).