UFP Industries (UFPI)

Building materials manufacturer UFP Industries (NASDAQ:UFPI) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 5.4% year on year to $1.56 billion. Its GAAP profit of $1.29 per share was 7.2% below analysts’ consensus estimates.

Company Overview

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ:UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.

Other companies that manufacture wood building products include Boise Cascade (NYSE:BCC), Weyerhaeuser (NYSE:WY), and Louisiana-Pacific Corporation (NYSE:LPX)

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, UFP Industries’s 6.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. UFP Industries’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.9% annually.

This quarter, UFP Industries missed Wall Street’s estimates and reported a rather uninspiring 5.4% year-on-year revenue decline, generating $1.56 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

UFP Industries has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 17.8% gross margin over the last five years. That means UFP Industries paid its suppliers a lot of money ($82.16 for every $100 in revenue) to run its business.

In Q3, UFP Industries produced a 16.8% gross profit margin, down 1.2 percentage points year on year. UFP Industries’s full-year margin has also been trending down over the past 12 months, decreasing by 2.3 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

UFP Industries has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.4%, higher than the broader industrials sector.

Looking at the trend in its profitability, UFP Industries’s operating margin decreased by 1.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, UFP Industries generated an operating margin profit margin of 5.7%, down 1.5 percentage points year on year. Since UFP Industries’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

UFP Industries’s EPS grew at a decent 8.6% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into UFP Industries’s earnings to better understand the drivers of its performance. A five-year view shows that UFP Industries has repurchased its stock, shrinking its share count by 2.1%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For UFP Industries, its two-year annual EPS declines of 20.5% mark a reversal from its five-year trend. We hope UFP Industries can return to earnings growth in the future.

In Q3, UFP Industries reported EPS of $1.29, down from $1.64 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects UFP Industries’s full-year EPS of $5.44 to grow 14%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

UFP Industries has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.4% over the last five years, slightly better than the broader industrials sector.

UFP Industries’s free cash flow clocked in at $210.2 million in Q3, equivalent to a 13.5% margin. This result was good as its margin was 2.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although UFP Industries hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 21.9%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, UFP Industries’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

UFP Industries is a profitable, well-capitalized company with $1.04 billion of cash and $234.4 million of debt on its balance sheet. This $808.2 million net cash position is 15% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results as its revenue, EPS, and EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $90.03 immediately following the results.

Updated: December 4, 2025 at 10:25 PM EST

Before making an investment decision, investors should account for UFP Industries’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping their customers, but in the case of UFP Industries, we’re out. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its unit sales declined.

UFP Industries’s P/E ratio based on the next 12 months is 16.6x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $113.67 on the company (compared to the current share price of $90.48).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.