Investopedia: UFPI Tries To Wait Out The Storm

In the food chain of building products, Universal Forest Products (Nasdaq:UFPI) is stuck in an uncomfortable middle. UFPI doesn't grow trees, so it doesn't have the luxury shared by Plum Creek (NYSE:PCL) or Rayonier (NYSE:RYN) of just trimming back harvests and waiting for the bad times to pass. As a value-added producer of wood products, it also cannot do much to drive demand - if Pulte (NYSE:PHM) isn't building homes and if remodelers aren't heading to Home Depot (NYSE:HD) to get supplies for remodeling projects, there's almost nothing the company can do about it.


Consequently, while UFPI appears in many respects to be a well-run company, it is in pretty rough shape these days. A recovery in the core markets is an eventual inevitability but can the company and its shareholders hold on long enough to reap the benefits?

Another Tough Quarter
UFPI has been on an unfortunate run of late, and the third quarter isn't any different. Revenue was basically in line with analyst expectations, but still down more than 2%. On the margin side, the picture is more mixed: the company did better than might be expected given the market conditions, but the company still missed the bottom line estimate.


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Investopedia: Harley-Davidson Looking A Little Over-Revved

Nobody knows what the "new normal" for this economy is going to look like. Poor employment and wage growth, and nervous banks are keeping a limit on big-ticket consumer spending, but it seems reasonable to assume that the average consumer's taste for leisure has not vanished for good. The trouble, though, is that some stocks like Harley-Davidson (NYSE:HOG) seem to be pricing in a quicker return to normal than the economy seems capable of delivering. (To learn more about the effect earnings will have on stock prices, check out Earnings: Quality Means Everything.)

A Strong Rebound in the Second Quarter  
Certainly Harley-Davidson showed some signs of life in this latest quarter. Revenue jumped 18% as the company shipped 13% more bikes and realized almost 7% better pricing. This growth was underpinned by better than 7% growth in domestic sales, while international sales and shipments were relatively softer. 


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Harley-Davidson Looking A Little Over-Revved (HOG, THO, WGO, PII, CCL, RCL, MTN, HMC)

Winnebago: OnThe Road To Recovery?

As manufacturers of big-ticket discretionary items that typically require credit financing and ample gasoline, RV makers took a major pounding during the Great Recession. So great was the damage, in fact, that two well-known companies (Fleetwood and Monaco Coach) declared bankruptcy, with the assets of the latter going to Navistar (NYSE:NAV). As one of the survivors, Winnebago (NYSE:WGO) hopes that the RV boom will enjoy a second act and that the company can recapture past growth and cash flow. (Read about the RV demographic in In Retirement, Snow Birds Leave Cold Weather Behind.)

A Strong Quarter on an Easy Comp 

Given how far sales fell for Winnebago, it stands to reason that the company should be able to produce impressive growth rates if or when it rebounds. Revenue in the company's fiscal first quarter snapped back by 53% over the same period a year ago to $123 million, as the company's unit shipments increased by 40%. Within that, Winnebago saw ever better growth in the highest-priced RVs (Class A) at 59%, with Class C unit sales increasing 44%. Class B sales dropped over 98% (to one unit) as the company left this business. As investors may have already suspected, average selling prices were also up on that higher contribution of Class A units.

Profitability improved, but once again from an easier low base. Gross profit bounced off the bottom and the company produced a gross margin of 9%. That 9% is clearly much better than the year-ago level (of almost nothing), but it's still well short of the mid-teens level that was commonplace a decade ago. Likewise, the company rebounded from an operating loss to an operating profit, with an operating margin (3.5% adjusted) of almost one-third of the old averages. (Take a deeper look at a company's profitability with the help of profit-margin ratios. For more insight, read The Bottom Line On Margins.)

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