Benchmark cuts UFPI stock target to $135, maintains Buy rating

On Wednesday, Benchmark analyst Reuben Garner revised the price target for Universal Forest Products (NASDAQ:UFPI) shares, lowering it to $135 from the previous target of $142, while still endorsing the stock with a Buy rating. Currently trading at $111.30, near its 52-week low of $107.25, this adjustment comes in the wake of the company’s fourth-quarter financial performance for the year 2024, which presented a complex picture.

UFP Industries, the company behind Universal Forest Products, reported diluted earnings per share of $6.77 for the last twelve months, despite facing headwinds. The company’s financial struggles were attributed to sustained weak demand in its Packaging (NYSE:PKG) and Construction segments. Total (EPA:TTEF) revenue reached $6.65 billion, reflecting a year-over-year decline of approximately 8%, even as unit sales remained steady. As a result, the company experienced suppressed profit margins, though InvestingPro data shows the company maintains strong financial health with a GOOD overall rating.

Despite these challenges, the Retail segment of UFP Industries managed to maintain its sales level compared to the previous year. Furthermore, the company saw an improvement in the gross margin for this segment, thanks to ongoing operational enhancements and a favorable product mix. The company has demonstrated long-term financial stability, maintaining dividend payments for 32 consecutive years with a current yield of 1.15%.

Looking ahead, the analyst anticipates that the current market conditions will continue into the first half of 2025, with a slight decline in overall demand across all three business segments. According to InvestingPro analysis, UFPI appears slightly undervalued at current levels. The stock offers additional potential, with analysts setting price targets ranging from $117 to $155. For deeper insights into UFPI’s valuation and eight more exclusive ProTips, explore the comprehensive Pro Research Report available on InvestingPro.

In other recent news, UFP Industries reported its fourth-quarter 2024 earnings, revealing a mixed performance. The company’s earnings per share (EPS) came in at $1.12, falling short of the forecasted $1.24, while revenue exceeded expectations at $1.46 billion, surpassing the predicted $1.42 billion. Despite the revenue beat, the company faced challenges with a 28% decline in adjusted EBITDA, reflecting ongoing pressures on profit margins. The company has identified structural cost savings of $60 million and maintains a strong cash position with a $1.2 billion surplus. Looking ahead, UFP Industries anticipates modest unit declines and continued pricing pressures in the first half of 2025.

DA Davidson maintained a Neutral rating on Universal Forest Products, with a steady price target of $120.00, following the company’s fourth-quarter 2024 earnings release. The firm’s analyst, Kurt Yinger, highlighted the company’s stable volume performance and reduced SG&A expenses as positives. However, concerns were raised over the decline in gross margins and the first sub-10% EBITDA margin in three years. DA Davidson’s analysis suggested a cautious perspective, reflecting both promising elements and persistent pressures in Universal Forest Products’ financial results. Investors can expect further updates from DA Davidson after a thorough evaluation of the company’s strategic direction and market position.

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