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DA Davidson Bullish On Universal Forest Product's Pullback, Upgrades To Buy

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D.A. Davidson believes the recent 4 percent pullback in Universal Forest Products, Inc. (NASDAQ: UFPI) offers an attractive entry point. Hence, the brokerage upgraded the stock to Buy from Neutral, and raised the price target by $5 to $110.

Shares of Universal Forest Products fell 4.38 percent on Wednesday to close the day’s trading at $91.75 on a volume of 313,400 shares versus its three-month average of 138,700 shares. Shares are also $19 below its 52-week high of $110.97.

In addition, the brokerage noted that the company’s idX acquisition increases its international exposure, while enhancing efficiencies in product design and development. The company paid $150 million (6X EBITDA) for idX, which is expected to boost EBITDA by 10 percent.

“If acquisitions can be accomplished at a similar multiple to idX, UFPI could conceivably grow EBITDA another $40 million,” analyst Steven Chercover wrote in a note.

Meanwhile, Universal Forest Products reported third quarter EPS of $1.36, which came in a penny above the consensus estimate. But, the number missed D.A. Davidson’s estimate by $0.10 due to a shortfall in gross margin.

As such, the analyst cut his FY 2016 EPS estimate to $4.94 from $5.01, but raised FY 2017 forecast to $5.81 (from $5.32) to reflect the gains from idX deal.

“While eventually the law of large numbers could kick in, we still believe UFPI is uniquely positioned to prosper and add value in a low growth economic environment,” Chercover concluded.

Latest Ratings for UFPI

DateFirmActionFromTo
Aug 2018Initiates Coverage OnBuy
Oct 2017Initiates Coverage OnMarket Perform
Oct 2016UpgradesNeutralBuy

View More Analyst Ratings for UFPI
View the Latest Analyst Ratings

Posted-In: D.A. Davidson Steven ChercoverAnalyst Color Upgrades Price Target Analyst Ratings

 

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