BMO cuts Universal Forest Products target to $110

On Thursday, BMO Capital Markets adjusted its outlook on Universal Forest Products (NASDAQ: NASDAQ:UFPI), reducing the stock’s price target from $125.00 to $110.00 while keeping a Market Perform rating. The revision follows a cautious tone from the company’s latest conference call, which BMO analyst Ketan Mamtora noted was more guarded than the one three months prior. The stock has fallen 8.45% in the past week and is currently trading near its 52-week low of $96.98. According to InvestingPro analysis, UFPI appears slightly undervalued at current levels, with 10+ additional real-time insights available to subscribers. The company, now under the leadership of new CEO Will Schwartz, is experiencing challenges due to soft demand, competitive pricing, and rising costs, which are impacting EBITDA margins, particularly in the Site-Built (Construction) and Packaging (NYSE:PKG) segments.

The analyst pointed out that with the housing demand not meeting expectations and the ongoing economic uncertainties, it’s anticipated that EBITDA will continue to face pressure for the majority of 2025. Despite these headwinds, Mamtora remarked on the strength of Universal Forest Products’ balance sheet, which offers the company some financial leeway in these turbulent times. InvestingPro data confirms this strength, showing the company holds more cash than debt and maintains strong liquidity with a current ratio of 4.96. The company has also demonstrated remarkable dividend stability, maintaining payments for 33 consecutive years with 12 years of consecutive increases. The decision to maintain the Market Perform rating reflects a recognition of these mixed factors, alongside the lowered price target.

The reduction in the price target to $110 indicates a more conservative estimate of Universal Forest Products’ future stock performance. This adjustment comes at a time when the company is navigating a complex market environment with several factors adversely affecting its profitability. The company’s financial stability, however, is seen as a positive aspect that could help it manage through the current challenges.

Universal Forest Products is contending with a sector that has been hit by weaker-than-expected housing demand. This situation is compounded by broader economic uncertainty that has a ripple effect on industries dependent on consumer spending and construction activities. The company’s Site-Built and Packaging operations are identified as the areas facing the most significant difficulties.

In summary, BMO Capital’s revised price target for Universal Forest Products shares reflects the anticipated continued pressure on the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) throughout the year. The firm’s analysis suggests that while the company is in a solid financial position, market forces and internal challenges are likely to constrain its performance in the near term. For a comprehensive analysis of UFPI’s financial health, valuation, and growth prospects, investors can access the detailed Pro Research Report available exclusively on InvestingPro, which covers over 1,400 US stocks with expert insights and actionable intelligence.

In other recent news, Universal Forest Products has reported its first-quarter earnings for 2025, revealing an earnings per share (EPS) of $1.60, which exceeded analyst expectations of $1.57. However, the company’s revenue fell slightly short of forecasts, coming in at $1.6 billion compared to the anticipated $1.61 billion. The company experienced a 3% decline in total sales and a significant drop in adjusted EBITDA by 21%, settling at $142 million. Benchmark analysts responded to these results by lowering the stock price target from $135 to $125 while maintaining a Buy rating, citing challenges such as manufacturing variances and rising material costs. DA Davidson maintained its Neutral rating with a $117 price target, highlighting the company’s effective expense management and significant share repurchase activities in April. Despite the revenue shortfall, the company is optimistic about its new product launches and strategic expansions, though it anticipates continued competitive pricing pressures. Looking forward, Benchmark has adjusted its earnings per share estimates for 2025 and 2026, reducing them by $1.00 and $0.75, respectively. Universal Forest Products’ management remains focused on navigating the challenging macroeconomic environment and maintaining market share.

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