Why Shares of Universal Forest Products Inc. Jumped

Why Shares of Universal Forest Products Inc. Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Universal Forest Products were looking hardy today, gaining as much as 15% after a strong fourth-quarter earnings report.

So what: The wood-products maker said sales grew 11.7% to $525.7 million, in line with estimates, while earnings swung from a $0.10 per-share loss in the year-ago quarter to a $0.40 per-share profit, much better than estimates at $0.17. In a press release, CEO Matthew Missad credited "much improved performance in housing and construction and a high and steadily rising lumber market" for enabling greater capacity and operating leverage, which led to the surge in profit. Unit sales were up 5%, and gross margin improved 280 points to 12.25%.

Now what: The company has now solidly beaten earnings estimates in four straight quarters. Given the improvements in lumber prices and the continuing upward outlook in the housing market, I'd expect Universal Products' prospects to keep improving. Look for analysts to bump up their estimates, which could make shares look like a bargain as this company seems to be one of the more overlooked housing recovery plays on the market.

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The article Why Shares of Universal Forest Products Inc. Jumped originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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