What UFP Industries (UFPI) Said on Its Q3 Earnings Call

Key Points

• UFP Industries’ Q3 sales rose 11% to $1.73 billion, driven by 4% organic unit growth, acquisitions and pricing. However, adjusted EBITDA fell 15% to $119 million as transportation costs increased sharply, cutting margins to 6.9%.
• Deckorators led retail growth, with decking sales up 69% and Surestone sales up 70%, while improved production reduced the decking backlog. Retail profitability still declined because of higher freight costs and weaker ProWood and railing results.
• Management maintained its full-year outlook despite challenging end markets and elevated freight and energy costs. UFP cited freight mitigation, maturing facilities, acquisitions, productivity efforts and market-share gains as opportunities to improve results in 2027.

UFP Industries NASDAQ: UFPI reported third-quarter 2026 net sales growth of 11% as organic unit volume rose 4%, marking the company’s second consecutive quarter of year-over-year volume growth. Management said demand appeared to be stabilizing across much of its portfolio, though end markets remained challenging and uneven.

Net sales totaled $1.73 billion, up from $1.56 billion a year earlier. Volume increased 6%, including 4% organic unit growth and a 2% contribution from acquisitions, while pricing added 5%, Chief Financial Officer Mike Cole said. The pricing increase reflected higher lumber prices passed through to customers and programs intended to offset other inflationary pressures.

Adjusted EBITDA declined to $119 million from $140 million in the prior-year quarter, and adjusted EBITDA margin fell to 6.9% from 9.0%. Cole said higher transportation costs were the primary reason for the decline. Transportation costs, net of fuel surcharges, increased $19 million year over year during the quarter, reducing margin by 1.3 percentage points.

Freight costs weigh on profitability

CEO Will Schwartz said transportation costs emerged as a significant industry challenge during 2026. Excluding fuel, freight rates increased 30% year over year as driver shortages, reduced carrier capacity and a stricter regulatory environment affected the market.

For the full year, UFP expects elevated freight costs to have a net $65 million impact on results. Cole said the company had experienced a $56 million increase in total transportation costs year to date, partly offset by about $7 million of fuel surcharges and pricing adjustments. Of the increase, he attributed $41 million to capacity leaving the market amid regulatory changes and $15 million to fuel costs.

Management said it expects freight rates to remain elevated through year-end and views the increase as a structural shift in baseline transportation pricing. The company is pursuing pricing recovery while also changing operating practices to reduce costs in 2027.

Newly acquired and greenfield operations also reported a combined negative EBITDA contribution of $3 million in the third quarter. Excluding the freight impact and losses from those newer operations, EBITDA across UFP’s business units increased by $1 million from a year earlier, according to Cole.

Retail growth led by Deckorators

Retail sales increased 7% to $635 million, supported by 6% higher pricing, a 1% acquisition contribution and flat organic unit volume. Within the segment, ProWood units declined 4%, while Deckorators units grew 21%. The MoistureShield acquisition contributed 10% to retail volumes.

Deckorators decking sales rose 69% during the quarter, including 70% growth in mineral-based Surestone products. Surestone sales were up 45% year to date. Improved production throughput at the company’s Selma and Buffalo facilities reduced the Surestone backlog to $18 million at quarter-end from $30 million at the end of the second quarter.

Schwartz said the decline in backlog reflected higher production rather than cancellations. He said the company expects to generate an additional $50 million in decking sales in 2027 compared with 2026 results, supported by expanded capacity and an upcoming agreement with a two-step distributor that is expected to fill geographic distribution gaps.

UFP now expects approximately $85 million in 2026 composite decking sales growth, including a $10 million inventory build at ProWood distribution locations, versus its prior $90 million decking target. The shortfall was tied to the ramp-up of the Buffalo facility, which began operating in April. The company also expects railing and other products to fall about $15 million below plan after anticipated share gains did not materialize and it lost a significant customer in the Ultra Aluminum business.

Retail adjusted EBITDA fell $6 million to $34 million, with margin declining to 5.4% from 6.7%. Cole said $8 million of higher transportation costs in ProWood and Deckorators masked improving profitability at Deckorators as production throughput increased.

Packaging and construction results

Packaging sales rose 18% to $466 million, driven by 9% organic unit growth, a 6% acquisition contribution and 3% higher pricing. Structural Packaging volume increased 14%, while national-account sales rose 35% on new customer wins. PalletOne volume grew 18%, aided by acquisitions and 1% organic growth, while Protective Packaging volume rose 5% as greenfield facilities progressed toward sales targets.

Packaging adjusted EBITDA declined $7 million to $27 million. Cole cited higher transportation and material costs, particularly elevated pallet materials that have been difficult to pass through to customers. Improved profitability at Structural Packaging partly offset the pressure.

The company also announced plans to acquire Apache Products, a wood pallet manufacturer serving the Texas and Louisiana Gulf region. Schwartz said Apache will join the PalletOne platform and expand UFP’s ability to serve industrial and petrochemical customers.

Construction sales increased 11% to $552 million, with units up 4% and selling prices up 7%. Site Built organic unit volume rose 12%, which management attributed to company-specific initiatives including its Frame Forward solution-selling approach, growth in light-gauge metal components and alternative materials. Schwartz cautioned that the result should not be viewed as evidence of a broader recovery in residential construction.

Factory Built units declined 10%, reflecting UFP’s planned exit from lower-margin commodity sales and a 6% decline in industry production. Commercial volume increased 20%, while concrete-forming volume grew 6%.

Construction adjusted EBITDA declined $4 million to $38 million, pressured by pricing conditions in Site Built and higher material costs. Growth and operating leverage in commercial and concrete forming partially offset those headwinds.

Capital allocation and outlook

At the end of September, UFP had approximately $677 million of cash, no outstanding revolver borrowings and total liquidity of about $2 billion. Year-to-date free-cash-flow conversion was 75% of adjusted EBITDA.

The board approved a quarterly dividend of $0.36 per share, payable in December, representing a 3% increase from the prior year. UFP repurchased $183 million of shares year to date, including $41 million in the third quarter, at an average price of about $84 per share. The company expects 2026 capital expenditures of $150 million to $175 million, including about $75 million of maintenance spending.

Management left its full-year outlook unchanged, expecting macroeconomic pressures, soft end-market demand and elevated energy and transportation costs to persist through year-end. For 2027, UFP said it sees opportunities to improve results through freight mitigation, maturing greenfield operations, acquisitions, productivity initiatives, new products and market-share gains.

About UFP Industries (NASDAQ:UFPI)

UFP Industries, Inc is a diversified manufacturer and distributor of wood, composite and other products serving the retail, construction and industrial markets. The company supplies materials and components used in outdoor living, residential and commercial construction, manufactured housing, packaging and a range of industrial applications.

Its products include treated lumber, decking, fencing, landscaping products, roof trusses, wall panels, wood components, pallets, crates, specialty packaging and other custom-engineered products.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.