I’m happy to report we now have an answer to the age-old question of whether a tree falling in the forest makes a sound if no one is around to hear it. The answer is a resounding "yes!"
You might be wondering how I came to this conclusion. Well, after the bell Wednesday night Universal Forest Products
Universal Forest blamed last night's weak results on a perfect storm of problems: snowstorms on the East Coast, flat lumber prices, and a strong quarter from the same period last year that would be difficult to reproduce. Negative growth in its do-it-yourself and housing market segments also hampered Universal Forest’s margins, according to the report. In the past two weeks, lumber prices have weakened to their lowest levels in 2011. So is it time for shareholders to throw in the towel on this company? I’d say not quite yet.
Trading just a shade above one time its book value and coming up to Universal Forest’s strongest quarter historically -- the second quarter -- I feel it may actually be time to give this company a closer look.
The company had some incredibly tough past figures to beat in the do-it-yourself and home construction markets. The year-ago quarter had the benefits of the first-time homebuyer tax credit which artificially stimulated homebuying and renovation. As we saw with KB Home
Another reason to rethink running away from Universal Forest is the pending rebuild in Japan. Weyerhaeuser
We’re also entering the heart of hurricane season, which often leads to increased lumber usage. Most lumber here is used for preparatory purposes, but rebuilding can lead to a major jump in lumber prices.
Finally, we should consider how successful Universal Forest has remained despite a depressed housing market. Rivals Louisiana Pacific
Weather issues -- such as the East Coast snowstorms -- are a one-time unforeseen event. Stripping that out of the equation, it wouldn’t take much for Universal Forest to head higher given its strong management team and rich history of profits. Don’t write this company off as a has-been or “wood-be” just yet.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He wonders how much wood a woodchuck could chuck if he tried to balance his day between trading and wood-chucking. You can follow him on CAPS under the screen name TMFUltraLong. Builders FirstSource is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that requires no hard hats.