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UFP Industries (UFPI) Arm Buys Spartanburg, Grows in Mid-Atlantic

UFP Industries, Inc. UFPI continues its acquisition spree. The company’s unit, Sunbelt Forest Products Corporation, has acquired the net operating assets of Spartanburg Forest Products, Inc. and its affiliates.

Following the news, shares of the company moved up 4.9% during the after-hours trading session on Apr 12, 2021.

The transaction is valued at $16.5 million. Sunbelt also acquired Spartanburg’s net working capital for an amount equal to the net book value determined on the date of closing, which totaled $146.5 million.

Headquartered in Greer, SC, Spartanburg and its affiliates are a leading wood treating operation in the United States, with operations in five states. Spartanburg operates four wood treating facilities and one manufacturing facility, mostly in the Mid-Atlantic. The combined companies — which include Appalachian Forest Products, Innovative Design Industries, Blue Ridge Wood Preserving, Blue Ridge Wood Products and Tidewater Wood Products — recorded 2020 sales of $543 million.

With this addition, Sunbelt will be able to boost product offerings to Spartanburg’s clients and expand geographic footprint to serve the existing customers.

Furthermore, Ken DelleDonne, president of Sunbelt Forest Products, said, “In addition, we expect to drive efficiencies in our supply chain and administrative services as we combine our operations. We’re excited to welcome the Spartanburg team to Sunbelt and look forward to building an even stronger future together.”

Acquisitions Drive Growth

Acquisitions have been UFP Industries' chosen mode of solidifying the product portfolio and leveraging new business opportunities. Sunbelt is a unit of UFP Retail Solutions, which is a subsidiary of UFP Industries. The company completed the acquisition of PalletOne and SunBelt in January 2021. The acquisition of PalletOne will give it a platform to add new products and services as well as create a new customer base. This is the largest and the most recent acquisition made by the company. Its capital allocation strategy is targeted at acquisitions to provide reasonable returns on investments.

On Mar 30, UFP Industries announced that the home decor business, Handprint — which is a unit of UFP Retail Solution — has inked an agreement to buy the business assets of Walnut Hollow Farm, Inc. The buyout is expected to be sealed by April 2021-end. However, the financial terms of the transaction have been kept under wraps.

Walnut Hollow Farm, based in Dodgeville, WI, is a manufacturer of diversified precisely finished wood surfaces used in hobby, craft and woodworking projects as well as in taxidermy. It also sells wood burning tools and accessories. In 2020, the company recorded roughly $11 million of net sales.

Again, on Mar 2, UFP Industries’ subsidiary, The UBEECO Group, completed the acquisition of J.C. Gilmore Pty Ltd (Gilmores). Gilmores is an Australian company, which is a major distributor of packaging tapes, stretch films, packaging equipment, strapping, construction protection products and other items to industrial and construction industries across the country. Gilmores recorded sales of $15 million AUD in 2020.

The company’s balanced business model and diversified product portfolio are major positives in this challenging time.

UFP Industries shares have gained 45.9% year to date compared with the Zacks Building Products – Wood industry’s 21.8% rally. Also, earnings estimates for 2021 have moved up 28% over the past 60 days, depicting analysts' optimism over the earnings growth potential. UFP Industries is benefiting from a solid U.S. residential market and high demand for repair and remodeling activities. Also, buyout gains and shareholders' rewards will work in its favor.

Zacks Rank & Other Key Picks

UFP Industries currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other top-ranked stocks in the same space include Weyerhaeuser Company WY, Louisiana-Pacific Corporation LPX and Rayonier Inc. RYN.

Weyerhaeuser sports a Zacks Rank #1 and is likely to witness a rise of 68.2% in earnings for 2021.

Louisiana-Pacific, also Zacks Rank #1 stock, is expected to witness 68.7% growth in earnings this year.

M.D.C, a Zacks Rank #2 (Buy) stock, is expected to witness 56% growth in 2021 earnings.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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UFP Industries, Inc. (UFPI): Free Stock Analysis Report
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