The Zacks Building Products – Wood industry is expected to benefit from higher demand across export markets, repair and remodel (R&R) activity and more funding for carbon/ESG-related projects despite continuous supply-chain woes, lower lumber prices, inflationary pressure and lower homes sales. In addition, inorganic and prudent cost-containment moves should lend support to industry players like Floor & Decor Holdings, Inc. FND, UFP Industries, Inc. UFPI and Boise Cascade Company BCC and Masonite International Corporation DOOR.
The Zacks Building Products – Wood industry includes forest product companies and manufacturers of lumber as well as other wood products that are used in home construction, repair and remodeling along with the development of outdoor structures. Companies in the industry design, manufacture, source, and sell flooring products like tile, wood, laminate, vinyl, and natural stone flooring products as well as decorative and installation accessories. The industry players are also involved in the manufacturing and distribution of wood and plastic composite products along with related accessories, mainly for residential decking and railing applications. The industry also includes timberland real estate investment trusts or REITs.
3 Trends Shaping the Future of Building Products - Wood Industry
Higher Export Market Demand, More Spending on Carbon/ESG Projects & Repair & Remodeling Markets: The industry participants have been experiencing higher demand across export markets owing to the combination of diverse factors. For example, shipping and logistics challenges are pushing up the demand for North American logs in Japan. Again, trade limitations have impacted the import of Australian logs into China. Meanwhile, the Russia-Ukraine war has led to the ban of log exports from Russia. Overall, this tightening global wood market is proving conducive for some of the industry participants. Meanwhile, the companies are experiencing higher funding for carbon/ESG-related projects to pursue carbon capture and storage work. The industry’s prospects are highly correlated with the U.S. housing market conditions. Although the slowing housing market and the pandemic-related challenges are creating hurdles, the R&R market (considered one of the largest in terms of lumber demand) has been going strong. Currently, lower lumber prices are creating an opportunity to perform renovations or DIY projects, thereby aiding wood industry participants. Also, increased government spending on infrastructure projects bodes well. Acquisitions, Product Innovation & Efficient Cost-Reduction Strategies: The companies also bank on acquisitions and divestitures to expand as well as improve portfolio quality. New products continue to be an important top-line driver for the industry players. Also, efforts to introduce products are likely to have helped the players. In a bid to reduce costs, companies have been reducing the cost structure of their facilities through the sale or shutdown of underperforming units and manufacturing facilities as well as investments in technology. Also, the industry players have been focusing on operational excellence, comprising merchandising for value, harvest, and transportation efficiencies, and flexing harvest to capture seasonal and short-term opportunities. Rapid Lumber Market Swings & Supply Chain-Related Challenges Weigh on Margins: Historically, volatility in lumber prices has been a major concern for the wood industry. Any unusual rise in the cost of lumber products sold by primary producers increases the cost of inventory and limits margins on fixed-priced lumber products. Yet, a decline in costs eats into profits as products sold are indexed to the current lumber market. Meanwhile, the timberland business is governed by federal rules and state forestry commissions, which are subject to frequent changes, thereby affecting businesses. Further, due to the very nature of their properties, timberland REITs are required to follow eco-friendly mandates in their trade. Furthermore, the companies have been experiencing supply chain challenges and higher freight and transport costs. For example, resin unavailability is posing quite a challenge. The industry participants use a significant quantity of various resins in the manufacturing processes. Resin product costs are influenced by changes in the prices or availability of raw materials used to produce resins, primarily petroleum products, and the demand and availability of resin products.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Building Products – Wood industry is a 12-stock group within the broader Construction sector. The Zacks Wood industry currently carries a Zacks Industry Rank #27, which places it in the top 11% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates impressive near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector & S&P 500
The Zacks Building Products – Wood industry has underperformed the broader Zacks Construction sector and the Zacks S&P 500 composite over the past year. Over this period, the industry has lost 26.2% compared with the S&P 500 and the broader sector’s 17.6% and 19.7% decline, respectively.
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing wood stocks, the industry trades at 13.7X versus the S&P 500’s 15.7X and the sector’s 10.5X. Over the last five years, the industry has traded as high as 39.5X, as low as 12.2X and at a median of 21.8X, as the chart below shows.
4 Wood Stocks to Keep a Close Eye On
We have selected two stocks from the Zacks universe of wood stocks that currently carry a Zacks Rank #1 (Strong Buy). We have also highlighted two stocks currently carrying a Zacks Rank #3 (Hold) and have been capitalizing on fundamental strengths. You can see the complete list of today’s Zacks #1 Rank stocks here. Boise Cascade Company: Based in Boise, ID, this Zacks Rank #1 company makes wood products and distributes building materials in the United States as well as Canada. Boise Cascade’s Building Materials Distribution and Wood Products segments are gaining strength from strong end-product demand (particularly for EWP) as well as higher commodity product prices. It has also been increasing commodity offerings that will instill growth in the existing markets, underserved markets and across its entire national footprint. Importantly, Boise Cascade — which has gained 9.2% in the past year — has seen a 2.1% upward estimate revision for 2022 earnings over the past 30 days. BCC has an expected earnings growth rate of 14% for 2022.
UFP Industries: Headquartered in Grand Rapids, MI, UFP Industries supplies wood, wood composite and other products to retail, industrial, and construction markets. The company has been gaining from its diversity of markets, higher organic unit sales, solid contributions from buyouts, new product innovation and an improved pricing model. UFP Industries' industrial and construction segments are experiencing favorable growth trends and profitability, given normalized retail demand. This Zacks Rank #1 stock has gained 0.2% in the past year. That said, UFPI has seen an upward estimate revision of 0.2% and 0.4% for 2022 and 2023 earnings, respectively, over the past 30 days. This depicts analysts’ optimism over the company’s prospects. UFP Industries’ 2022 earnings are expected to grow 23.2%.
Floor & Decor Holdings: Based in Atlanta, GA, this Zacks Rank #3 company operates as a multi-channel specialty retailer and commercial flooring distributor of hard surface flooring and related accessories. The company has been benefiting from its growth strategies, which are successfully generating profits despite near-term macroeconomic challenges like inflationary costs, rising mortgage rates, and declining existing home sales. FND shares have lost 40.6% over the past year. That said, FND has an expected earnings growth rate of 11.1% for 2022 and 28.4% for 2023.
Masonite International: This Tampa, FL-based company manufactures, and distributes interior as well as exterior doors. This Zacks Rank #3 company is expected to generate higher EBITDA owing to the pricing strategy adopted in the North American Residential segment. Product introduction and marketing initiatives aimed at supporting growth and a favorable mix have been benefiting the company. These initiatives, combined with prudent price-cost management, will allow DOOR to navigate near-term macroeconomic headwinds well and make continued progress toward 2025 Centennial Plan. DOOR has dropped 32.8% over the past year. Yet, DOOR has seen a 10.3% upward estimate revision for 2022 earnings over the past 60 days. The positive estimate revisions depict analysts' optimism over the company’s prospects. DOOR has an expected earnings growth rate of 26.7% for 2022 and 9% for 2023.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Floor & Decor Holdings, Inc. (FND) : Free Stock Analysis Report UFP Industries, Inc. (UFPI) : Free Stock Analysis Report Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report Masonite International Corporation (DOOR) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
Total S&P 500 earnings are expected to be up 0.7% from the same period last year on 9.1% higher revenues.
UBS analyst Patrick Hummel downgraded shares of Ford to Sell from Hold. He cut his GM rating to Hold from Buy.
Shares of enterprise software companies Twilio (NYSE: TWLO), Snowflake (NYSE: SNOW), and Appian (NASDAQ: APPN) fell hard again Monday, down 6.3%, 9.3%, and 6.5%, respectively, as of 3:44 p.m. EDT. In addition, long-term bond yields remained high. On Monday, cloud-based service-center software company Five9 (NASDAQ: FIVN) plunged over 25%, after CEO Rowan Trollope announced he would be resigning for another role at a pre-IPO tech company.
Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Anyone who held Carnival Corporation...
In this article, we discuss 5 dividend stocks that are too cheap to ignore. You can skip our detailed analysis of dividend stocks and their returns in the past, and go directly to read 5 Dividend Stocks That Are Too Cheap To Ignore. As the market plunges to its new lows in 2022, investors are […]
The company, which is effecting a rare reverse-stock split, is coping with a period of rising interest rates.
A Cowen analyst says chip stocks are near all-time low valuations after their big drops this year. Several offer solid buying opportunities.
Yahoo Finance's Alexandra Semenova breaks down what to watch from big banks as they're set to release earnings this week.
Yahoo Finance Live anchors discuss stock performance for PayPal as well as why the financial tech company is backtracking on its misinformation policy.
Today's Research Daily features new research reports on 16 major stocks, including NVIDIA Corporation (NVDA), Pfizer Inc. (PFE) and Citigroup Inc. (C).
It may not be practical — at least for now.
Qualcomm (NASDAQ: QCOM) shareholders were nervous today after the U.S. Department of Commerce said on Friday that it would restrict exports of some semiconductors to China. The U.S. government is worried about the Chinese government having access to high-end chips made in America. As a result, the semiconductor stock fell 4.9% as of 2:49 p.m. ET.
Shares of Nvidia (NASDAQ: NVDA) were down 4.5% as of 1:15 p.m. ET on Monday, following another analyst weighing in with a warning for investors. This has sent Nvidia shares down 60% year to date. Nvidia stands to lose $400 million in quarterly revenue.
(Bloomberg) -- Chip-related stocks in Japan, South Korea and Taiwan slumped, contributing to a wipeout of more than $240 billion from the sector’s global market value after the Biden administration imposed curbs on China’s access to semiconductor technology.Most Read from BloombergHere’s How Weird Things Are Getting in the Housing MarketThis Is What 7% Mortgages Will Do to the Housing MarketScreening Procedure Fails to Prevent Colon Cancer Deaths in Large StudyCathie Wood Warns of ‘Serious Losse
Dow Jones futures were lower before Tuesday's open after the Nasdaq hit a new 2022 low. Q3 earnings season will kick off this week.
Markets finished last week on a down note, with the S&P 500 and the NASDAQ falling 2.8% and 3.8%, respectively. The Friday collapse came in the wake of the September jobs report, which further fed into investor worries that the Federal Reserve will continue pushing interest rate hikes even at risk of a recession. The headline number, 263,000 new jobs in the month, came in below the forecast of 275,000, and was well below the August print of 315K. At the same time, the headline unemployment rate
Oil prices have bounced around quite a bit this year. Brent oil, the global-pricing benchmark, started 2022 below $80 a barrel before soaring into the $120s following Russia's invasion of Ukraine. With the prospect of higher oil prices, we asked some of our energy contributors what oil stocks they believe are best positioned to capitalize following OPEC's bold move.
Where do millionaires keep their money? High net worth individuals put money into different classifications of financial and real assets, including stocks, mutual funds, retirement accounts and real estate. Most of the 20.27 million millionaires in the U.S. did not … Continue reading → The post Where Do Millionaires Keep Their Money? appeared first on SmartAsset Blog.
It was yet another difficult day for automotive investors. This morning, share prices of Ford (NYSE: F) and General Motors (NYSE: GM) were sliding after a UBS analyst downgraded the automotive stocks. Nio (NYSE: NIO) investors weren't having much of a better morning either, as the Chinese automaker's stock was falling likely on news that fellow EV maker Rivian issued a significant recall of most of its vehicles.
Autos correspondent Pras Subramanian outlines Tesla's EV production figures from its factory in China, Rivian's recall, and analyst outlooks on Ford and General Motors amid inflation and supply chain concerns.