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USG Corporation (NYSE: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-2.83Insider Own1.32%Shs Outstand105.84MPerf Week-0.24%
Market Cap1.79BForward P/E80.71EPS next Y0.21Insider Trans30.93%Shs Float90.30MPerf Month-18.51%
Income-299.00MPEG-EPS next Q-0.08Inst Own75.46%Short Float25.23%Perf Quarter-1.74%
Sales3.18BP/S0.56EPS this Y6.88%Inst Trans1.19%Short Ratio6.85Perf Half Y11.81%
Book/sh1.11P/B15.27EPS next Y124.30%ROA-7.87%Target Price19.86Perf Year72.61%
Cash/sh4.53P/C3.75EPS next 5Y3.00%ROE-92.71%52W Range5.75 - 20.98Perf YTD66.83%
Dividend-P/FCF-EPS past 5Y-68.97%ROI-9.12%52W High-19.21%Beta2.82
Dividend %-Quick Ratio1.83Sales past 5Y-12.24%Gross Margin9.91%52W Low194.78%ATR1.06
Employees8780Current Ratio2.44Sales Q/Q8.41%Oper. Margin-3.18%RSI (14)44.67Volatility4.85% 5.87%
OptionableYesDebt/Eq19.59EPS Q/Q20.52%Profit Margin-9.41%Rel Volume1.09Prev Close16.38
ShortableYesLT Debt/Eq19.53EarningsJul 25 BMOPayout-Avg Volume3.33MPrice16.95

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.