Universal Forest Products Inc. (UFPI) reported disappointing results in second quarter 2010 with EPS falling 19 cents short of Zacks Consensus. Healthy top-line growth was offset by higher cost of sales due to volatile lumber prices in the quarter.
Also, Universal’s huge dependence on general market conditions and growth in end markets increase top-line risks in the event of any adverse conditions. Further, significant volatility in the cost of commodity lumber products from primary producers is problematic.
The company also derives a large portion of its sales from one single customer, which exposes it to customer concentration risks. In anticipation of a lack of positive catalysts, we downgrade the stock to an Underperform recommendation.
UNIVL FST PRODS (UFPI): Free Stock Analysis Report
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