UFPI Q2 Deep Dive: Margin Pressure Persists Amid Competitive Market and Weak End Demand

Building materials manufacturer UFP Industries (NASDAQ:UFPI) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 3.5% year on year to $1.84 billion. Its non-GAAP profit of $1.70 per share was 7.8% below analysts’ consensus estimates.

Is now the time to buy UFPI? Find out in our full research report (it’s free).

StockStory’s Take

UFP Industries' second quarter was marked by a negative market reaction as the company missed Wall Street’s revenue and profit expectations. Management attributed the underperformance to ongoing weakness in end-market demand, competitive pricing, and higher input costs, particularly in the site-built construction and packaging segments. CEO Will Schwartz emphasized that “results remain pressured from weaker demand, competitive pricing, higher input costs, and a less favorable sales mix.” Notably, while most business units saw sales and profit margins stabilize sequentially, the site-built division continued to struggle, and pricing visibility across end markets remained limited.

Looking ahead, management expects the challenging market conditions to persist for the remainder of the year, with external headwinds such as lumber tariffs and soft residential construction weighing on growth. The company plans to focus on cost-out initiatives, operational efficiencies, and targeted capacity investments, especially in high-potential products like SureStone decking. CFO Mike Cole noted that UFP Industries is “well positioned to achieve or exceed our goal of $60 million in cost outs by 2026,” while also prioritizing balanced capital allocation across organic growth, M&A, and shareholder returns. Management sees opportunities for market share gains in select segments but remains cautious about near-term demand.

Key Insights from Management’s Remarks

UFP Industries’ leadership pointed to stabilization in most business units and progress on cost reduction programs, even as weak demand and competitive pricing drove margin declines.

• Site-built business under pressure: The site-built construction segment continued to face significant pricing and volume challenges due to weak builder sentiment, a softer spring selling season, and high inventories of homes, which management expects to persist through year-end.
• Progress on cost reduction: The company advanced its $60 million cost-out program, including manufacturing consolidations and facility closures, aiming for full savings by 2026. These moves are expected to improve profitability, particularly in underperforming segments.
• SureStone and new product growth: Sales of SureStone composite decking increased 45% year over year, supported by expanded distribution and marketing campaigns. New products made up 7% of total sales, with management targeting 10% over time.
• Portfolio streamlining and divestitures: UFP Industries completed the divestiture of a small industrial components business and is in the process of selling certain real estate assets, potentially realizing $15 million in one-time gains in the third quarter.
• Mixed segment performance: While most segments showed sequential stabilization, retail volumes fell due to intentional exits from lower-margin lines and competitive shifts. Packaging and construction segments remained challenged by soft demand, though structural packaging and factory-built units showed some resilience.

Drivers of Future Performance

Management expects external headwinds and internal restructuring to shape results, with a focus on cost controls, targeted investments, and product innovation to support margins and growth.

• Tariff and input cost risks: News of higher duties on Canadian lumber and other tariffs could further pressure margins, especially in construction. Management believes its diversified sourcing and ability to substitute domestic species will help mitigate some of these effects, though the competitive environment limits pricing power.
• Deckorators and value-add expansion: UFP Industries is prioritizing capacity investments in high-growth areas like SureStone decking, aiming for a full rollout to 1,500 stores by 2026. The company expects marketing and capacity expansion to drive market share gains, especially among contractors and affluent consumers.
• Cost discipline and capital allocation: The company’s $60 million cost-out program, SG&A reductions, and facility consolidations are intended to offset volume declines and protect margins. Management also highlighted a preference for M&A-driven growth but will continue share repurchases if acquisition opportunities do not materialize at attractive valuations.

Catalysts in Upcoming Quarters

Looking ahead, our analysts are watching (1) the ongoing ramp-up and market adoption of SureStone decking products, particularly as capacity expansions come online; (2) the realization of cost savings from facility closures and SG&A reductions, and whether these measures stabilize margins; and (3) the impact of lumber tariffs and competitive pricing on both site-built and packaging segments. Progress in M&A activity and execution on new product launches will also be important indicators of UFP Industries’ ability to navigate the current environment.

UFP Industries currently trades at $102.54, down from $104.38 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

Our Favorite Stocks Right Now

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.