(By Rich Bieglmeier) Universal Forest Products Inc. (UFPI) is expected to report earnings before the market opens on Friday, July 20, 2012. Management will host the conference immediately afterwards.
Wall Street anticipates that UFPI will earn $0.71 for its 2nd quarter. iStock expects the maker of wood and wood-alternative products to report earnings that will top Wall Street's consensus number. The iEstimate is 84 cents – a potential 13 cent upside surprise.
In three of the last four quarters, Universal has rewarded investors with returns of 6.8%, 10.3% and 26% in the days surrounding earnings. The stock gained 0.9% in the fourth. UFPI has a history of hitting homerun surprises or strikeout disappointments.
In nine of the last 16 earnings announcements, the industrial goods company exceeded forecasts by as much as 600% and as little as 7%. The average upside surprise has been 170%, with six surpassing the consensus number by more than 70%.
Six times in the last four years, UFPI failed to live up to the Street's hopes. The swings-and-misses have ranged from 9.38% to 2,000%. See, it's all or nothing in most cases. Seventy-five percent of the misses were less than 75%, with a 500% strike mixed in with the 2k.
Universal Forest has been bobbing around a 52-week high recently; however, since the start of May, the share price has traded fairly tight to its 50-day average. The chart shows solid support at $39 and then again at $37.60 - $37. There is a lot of technical degree that should hinder any drop.
A solid earnings report and muscular guidance could lift the stock price to $45.
iStock does have some concerns. The cost of lumber during the second quarter could be a drag on earnings (less than 2%) as Random Lengths framing lumber composite's price trended higher for most of Q2 versus Q1.
Fortunately, the company seems to manage inventories well, so any rise in lumber prices should be mitigated. Additionally, the business mix favors value-added, higher margin products. Again, offering a counter balance if higher wood prices tugged on profitability.
With Econoday reporting "construction appears to be picking up steam," iStock believes the odds favor an upside surprise. Although, management's forward guidance will hold the key to Wall Street's reaction.