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Universal Forest Products Inc. (NASDAQ:UFPI) is slated to release its fourth quarter and fiscal year 2010 results on Thursday, February 10. The current Zacks Consensus Estimate for earnings per share (EPS) is a loss of 2 cents, representing an annualized growth of 41.67%.

With respect to earnings surprises, over the trailing four quarters, Universal Forest lagged behind the Zacks Consensus Estimate in two quarters, outperformed in one quarter and was in line with another quarter. The average earnings surprise was a negative 134.55%, implying that the company underperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter Highlights

Universal Forest reported disappointing results for the third quarter of 2010 with net income falling despite a healthy top-line growth. Net income plummeted 74.3% year over year to $2.6 million, or 13 cents per share compared with $10.1 million or 51 cents per share in the third quarter of 2009. Earnings per share also fell short of the Zacks Consensus Estimate of 52 cents.

The fall in net income was due to a 9.7% increase in lumber costs during the quarter.

The top line registered a 5.0% growth to reach $480.6 million versus $457.8 million in the year-ago quarter. The increase was driven by healthy growth in all the markets served, except weak results from the Do-It- Yourself/retail market.

Detailed discussion on the third quarter results can be found here: Lackluster 3Q for Universal Forest

Agreement of Estimate Revisions

In the last 30 days, out of the analysts providing estimates for the stock, none revised their estimates for the fourth quarter and fiscal years 2010 or 2011.

Magnitude of Estimate Revisions

Estimates, over the last 30 days, remained intact for the fourth quarter of 2010 at a loss of 2 cents per share, representing a year-over-year growth of 41.67%. For fiscal year 2010, the estimate was at 88 cents, down 29.87% year over year and for 2011 it was at $1.66, up 89.64% year over year.

Our Take

Universal Forest Products based in Michigan, engineers, manufacturers, treats, distributes, and installs lumber, composite wood, plastic and other building products for its do-it-yourself (DIY), site-built construction (homebuilders), manufactured housing, and industrial markets.

The recent economic crisis had a drastic impact on Universal Forest’s financial due to its heavy exposure to the U.S. housing market. Though slowly, things have started stabilizing, with the company being well poised to leverage from its industrial and manufactured housing businesses in the quarters to come.

However, higher cost of sales due to volatile lumber prices can be a cause of concern and can even upset results in the fourth quarter. Moreover, competitive pressure from peers like Bluelinx Holdings Inc. (NYSE:BXC) and Builders FirstSource Inc. (NASDAQ:BLDR) can be a hurdle to growth.

We currently maintain a Neutral recommendation on the stock.

Source: Universal Forest Products: Earnings Preview