UFP INDUSTRIES INC (UFPI)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 was pressured by softer demand and more competitive pricing; net sales fell 4% YoY to $1.46B and diluted EPS was $1.12; adjusted EBITDA declined to $132.7M (9.1% margin) as pricing pressure and mix weighed on Packaging and Construction margins .
• Management is cautious on 1H25 (slightly down demand, competitive pricing) but emphasized cost actions ($60M run-rate savings by 2026) and a balanced capital plan (2025 capex approvals ~ $350M) to drive mix and efficiency improvements .
• Retail held up better with stable gross profit; Surestone composite decking grew 43% in the quarter and is set for big-box shelf expansion to 1,500+ stores in 2H25—key potential narrative catalysts despite near-term macro headwinds .
• Capital returns and liquidity remain strengths: dividend raised to $0.35/quarter; liquidity ~$2.5B with nearly $1.2B cash at year-end, supporting organic/M&A growth while navigating a mixed macro .
• S&P Global consensus estimates were unavailable at time of analysis (API limit), so we cannot quantify beat/miss this quarter; traders should focus on the evolving pricing/mix dynamics, Retail product momentum (Surestone), and execution on cost-out and capacity actions [functions.GetEstimates error].

What Went Well and What Went Wrong

• What Went Well

  • Retail segment resilience: Q4 Retail net sales were flat YoY at $525M with gross profit stable ($68M, 12.9%) on SKU rationalization and operating improvements .
  • Deckorators/Surestone momentum: in Q4, Deckorators decking sales +20% with Surestone +43% and comprising 55% of composite decking sales; management expects big-box expansion into 1,500+ stores in 2H25 .
  • Liquidity and capital allocation firepower: nearly $1.2B cash and ~$2.5B total liquidity at year-end; dividend increased to $0.35/share while maintaining disciplined M&A and capex plans .
  • Quote: “We will carefully manage our profitability and remain on track to achieve cost savings of $60 million by the end of 2026.” – CEO Will Schwartz .

• What Went Wrong

  • Margin compression from pricing and mix: Q4 gross margin fell to 16.4% (from 19.4% in Q4’23); Packaging gross profit margin declined to 16.2% (from 19.9%) on competitive pricing and less favorable mix .
  • Construction pressure: Q4 Construction gross profit margin dropped to 17.9% (from 23.5%) as lower volumes, unabsorbed fixed costs, pricing, and mix weighed; operating margin (consolidated) declined to 5.4% (from 8.1% in Q4’23) .
  • 1H25 outlook: management expects slightly down demand across segments and competitive pricing to persist into 1H25, limiting near-term profitability .

Financial Results

Quarterly trend – revenue, EPS and margins (oldest → newest):

YoY comparison – Q4 2024 vs Q4 2023:

• Note on estimates: S&P Global consensus estimates were unavailable due to a temporary API rate limit; therefore, beat/miss could not be assessed this quarter [functions.GetEstimates error].

Segment breakdown – Q4 2024 vs Q4 2023:

KPIs and operating indicators:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic posture: “Our team is focused on investing in our most promising growth opportunities and businesses that will generate the highest long-term returns… and remain on track to achieve cost savings of $60 million by the end of 2026.” – CEO Will Schwartz .
• Product innovation: “We’ll showcase… new Deckorators product lines made with Surestone technology… [and] prioritize… value to customers… through automation, new value-added product introductions, and plant optimization.” – CEO Will Schwartz .
• Cost/efficiency actions: “We have already identified $60 million of structural cost savings from cost and capacity reductions… our plan for SG&A… is $565 million [in 2025]… [and] ~+$15 million [gross profit] in 2025 from capacity actions.” – CFO Mike Cole .
• Balance sheet and returns: “Nearly $1.2 billion in cash… total liquidity ~$2.5 billion… dividend increased to $0.35… repurchases under $200 million authorization.” – Press release .
• Operating environment: “We expect the business conditions… will carry over through the first half of 2025… competitive pricing… modest unit declines across each business unit.” – CEO/CFO .

Q&A Highlights

• Deckorators distribution: Big-box shelf expansion in a “big way” to 1,500+ stores targeted for 2H25; capacity and marketing investments underway to support rollout .
• Construction margin drivers: Significant pricing declines in Site Built and unfavorable mix as Site Built (highest-margin unit) shrank as a share; mix pressure expected to continue in 1H25 .
• Packaging dynamics: Ongoing demand pressure and competitive pricing; mix headwind as Structural Packaging volumes lag while PalletOne gains share .
• Cost structure and SG&A: 2025 core SG&A planned at ~$565M (ex variable elements); bonus expense ~16–17% of pre-bonus operating profit; sales incentives ~5% of gross profit .
• Capex and capital deployment: 2025 new approvals targeted at ~$350M; multi-year capex commitment remains elevated ($250–$300M per year) to fund growth, greenfields, and automation; ability to pivot to M&A if valuations become attractive .

Estimates Context

• We attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for Q4 2024 revenue and EPS but the request failed due to a temporary daily API limit. As a result, we cannot determine beat/miss versus Street for this quarter [functions.GetEstimates error].
• Where applicable in tables, the consensus column is marked N/A; future updates can fill this once S&P Global access is restored.

Key Takeaways for Investors

• Near-term headwinds persist: expect slightly down demand and competitive pricing into 1H25, with margin recovery hinging on mix improvement and execution of cost/capacity actions .
• Retail outperforms internally: stable gross profit in Q4; Deckorators/Surestone has tangible growth vectors (43% growth in Q4; 1,500+ store expansion in 2H25), which could re-rate sentiment on product-led growth despite macro .
• Packaging mix is the swing factor: Structural Packaging weakness and PalletOne share gains drive mix; watch for demand stabilization and pricing discipline to rebuild margin .
• Execution KPIs: track SG&A run-rate ($565M plan), realized gross profit uplift from capacity actions (~$15M in 2025), and cadence toward $60M cost savings by 2026 .
• Capital deployment remains a support: 2025 capex approvals (~$350M) to fund higher-margin growth and automation; raised dividend and opportunistic buybacks supported by ~$2.5B liquidity and ~$1.2B cash .
• Risk watchlist: Canadian lumber tariff path (paused 30 days), pricing competitiveness, Site Built margin pressure, and macro sensitivity in R&R and housing starts .
• Medium-term thesis: if pricing pressure moderates and mix shifts (Retail products, Factory Built) sustain, combined with cost savings, UFPI can restore double-digit EBITDA margins closer to long-term 12.5% goal over a multi-year horizon .