USG Corporation (USG), through its subsidiaries, is a manufacturer and distributor of building materials. The company produces a range of products for use in new residential, new non-residential, and residential and non-residential repair and remodel construction, as well as products used in certain industrial processes. The current market price is $16.95 with a one-year analyst price target of $19.14. This represents a 12.92% upside potential, but I feel this stock will see substantially higher gains moving forward into 2013 and 2014.
On 07/25/12, the company announced quarterly earnings of -0.15 per share, a negative surprise of -27.1% below the consensus -0.12. Over the past 4 quarters, the company has reported 2 positive (>2%) and 2 negative surprises. The average surprise for this time period has been 0.8%. With these earnings results, combined with a lack-luster housing market, the price of the stock has plummeted from the $40-$50 range before the housing collapse. Currently, USG's debt-to-capital of 93.6% is the highest within its Construction Materials industry, and its ROE is the lowest within the industry. Despite all of the turmoil and negative publicity USG has maintained its 5-Star S&P rating.
|Index||-||P/E||-||EPS||-2.83||Insider Own||1.32%||Shs Outstand||105.84M||Perf Week||-0.24%|
|Market Cap||1.79B||Forward P/E||80.71||EPS next Y||0.21||Insider Trans||30.93%||Shs Float||90.30M||Perf Month||-18.51%|
|Income||-299.00M||PEG||-||EPS next Q||-0.08||Inst Own||75.46%||Short Float||25.23%||Perf Quarter||-1.74%|
|Sales||3.18B||P/S||0.56||EPS this Y||6.88%||Inst Trans||1.19%||Short Ratio||6.85||Perf Half Y||11.81%|
|Book/sh||1.11||P/B||15.27||EPS next Y||124.30%||ROA||-7.87%||Target Price||19.86||Perf Year||72.61%|
|Cash/sh||4.53||P/C||3.75||EPS next 5Y||3.00%||ROE||-92.71%||52W Range||5.75 - 20.98||Perf YTD||66.83%|
|Dividend||-||P/FCF||-||EPS past 5Y||-68.97%||ROI||-9.12%||52W High||-19.21%||Beta||2.82|
|Dividend %||-||Quick Ratio||1.83||Sales past 5Y||-12.24%||Gross Margin||9.91%||52W Low||194.78%||ATR||1.06|
|Employees||8780||Current Ratio||2.44||Sales Q/Q||8.41%||Oper. Margin||-3.18%||RSI (14)||44.67||Volatility||4.85% 5.87%|
|Optionable||Yes||Debt/Eq||19.59||EPS Q/Q||20.52%||Profit Margin||-9.41%||Rel Volume||1.09||Prev Close||16.38|
|Shortable||Yes||LT Debt/Eq||19.53||Earnings||Jul 25 BMO||Payout||-||Avg Volume||3.33M||Price||16.95|
On the flip side, USG has a lot of room for growth and I believe the stock is at a bargain price. USG's average wallboard price of $130 per thousand square feet in 2012's first quarter was 19% above the level in the 2011 quarter. This largely reflected changing market conditions, and USG's decision and capability to offer a full-year wallboard price for its customers at what it called a significantly higher level.
Real estate website Zillow is forecasting that the end may be near, expecting home values nationwide to bottom during the final three months of 2012. As a matter of fact, some believe that the housing market has already started to turn around. USG has idled or permanently closed 3.8 billion square feet of wallboard capacity since mid-2006, its plants operated at only 43% of capacity in 2011. Despite this, USG's net loss is shrinking sharply in this year, currently at $0.10 a share, versus an operating loss of $3.02 a share in 2011.
In addition, Berkshire Hathaway currently holds a 16% stake in the company, which may further reflect anticipation of an increase in stock price. For fiscal year 2013, analysts estimate that USG's earnings per share will grow by 129% to $0.13. I believe while this stock has endured substantial amounts of pressure from the market, it is at the right price to see gains in the future. This is a staple for any long-term portfolio looking for gains.
Disclosure: I am long USG.