Wanna build a house? You'll need some wood. Wanna build a deck? You'll need some wood. Wanna build shipping crates or pallets? You'll need some wood.
Whether it's lumber for house frames, shipping crates, or decks, Universal Forest Products (NASDAQ:UFPI) is an acorn-to-tree supplier of pressure-treated wood, roof systems, wood alternatives, and a host of other lumber products.
With a strong housing market, it is no great surprise that second-quarter results were solid. Sales were up 5%, operating margins improved, and net earnings climbed 15% for the quarter.
Looking at the business lines, the retail/DIY business was flat for the quarter, although it still accounted for 44% of total sales. The company continues to walk away from low-margin business (bad for growth, good for profits) but continues to look for niche acquisitions to add high-value products to its roster. A large component of the retail segment, Home Depot (NYSE:HD) has accounted for almost one quarter of the company's sales through the first six months of the year.
Elsewhere, the company saw better growth results. The site-built business grew 10% for the quarter, and the industrial business clocked in with nearly 12% growth. In manufactured housing, a 10% unit sales increase was offset by softer pricing, and the net result was more than 6% top-line growth.
Given the current tenor of business, management apparently felt comfortable raising guidance for the remainder of the year. Instead of the 10-15% earnings growth of earlier guidance, management is now looking for 15-20% growth for the year.
Now, I know what many of you are thinking. What happens to this company when this boom in new home construction comes to an end? Surprisingly enough, the company should do all right even when the inevitable slowdown comes.
Why, you ask? Because unlike other suppliers that are largely, or even totally, dependent upon new home construction, Universal Forest is far more diversified. The industrial business tends to be countercyclical, and the manufactured-housing business has historically picked up when the new home market ticks down. What's more, existing homeowners will still need and desire repairs, renovations, and additions of such things as decks or fencing.
So even in the unlikely event that new home construction goes completely in the tank, Universal Forest still has other meaningful lines of business to take up some of the slack. In the meanwhile, investors can enjoy a company that boasts of being "the only company that uses the whole log" and produces some respectable growth, as well.
We've lugged some more lumber takes for your do-it-yourself enjoyment:
Do you like to find solid growth stories before they're splashed on the front page of every news site? So does the team at Motley Fool Hidden Gems . Take a free 30-day trial subscription today and see how we mine the unappreciated and ignored diamonds of tomorrow.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
