Editor's note: The previous version of this article listed Louisiana Pacific
Expectations are a nuisance.
Analysts don't really like to look stupid, so when you thrash their estimates a few times in a row, they start ratcheting them up. Sooner or later, it gets tougher to exceed that rising bar, and investors go away grumpy. That seemed to be the fate of Universal Forest Products
Sales growth of about 6% may not sound all that special, but I think net income growth of 20% is pretty acceptable in most cases. Then again, this company managed to post 24% and 72% growth in those respective figures in the March quarter, so maybe folks had gotten a bit spoiled.
I don't want to try to buff up the numbers, but I think a few points are worth making. First, Universal Forest posted its growth even though lumber prices were down about 14% from last year. What's more, value-added products grew to 56% of sales versus 50% last year -- not a big jump, maybe, but the incremental difference in margin is more significant.
We all know what sort of state the housing market is in. Companies ranging from DR Horton
While some might consider the recent change in management a risk factor, I'm not all that concerned -- the new CEO comes from inside the company, and while there will certainly be changes, I wouldn't expect them to be significant. My bigger concern now is frankly just investor psychology. Universal Forest may well find itself pushed down below fair value, but stepping up to buy when everyone is still running for the exits is a recipe for near-term pain.
Keep 'em on your watch list, though. I have a feeling we haven't seen our last big quarter out of this company.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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