This week's top idea at Singular Research is UFP Technologies, Inc. (UFPT), a producer of innovative custom-engineered components, products, and specialty packaging. Singular currently has a 12-month price target of $23.00 per share on the company, representing upward potential of about 40 percent based on its current trading price of about $16. We have a buy rating on UFP.
Investment highlights include:
- Q1 revenues rose to $32.0 million from $31.5 million in Q1:11. However, excluding $1.8 million in door panel sales from Q1:11 results, we estimate revenues were up about 7.6%. We had forecast revenues of $31.4 million.
- UFPT saw strength in all end-use markets with the exception of automotive, with particular strength in medical (+$0.5 million) and molded fiber packaging (+$1.0 million).
- Gross margin rose 90 bps to 28.8% from 27.9% and was nicely above our 27.7% estimate with the improvement attributed to a better mix of business.
- SG&A expense fell 90 bps to 17.3% of revenues, 100 bps below our 18.3% estimate as expenses declined by $0.2 million due to lower professional fees while revenues rose $0.5 million.
- Operating profit excluding asset sale gains rose to $3.7 million or 11.5% of revenues from $3.1 million, or 9.8% of revenues.
- Net income rose 6.5% to $2.35 million from $2.21 million while EPS growth of 3.1% to $0.33 from $0.32 in Q1:11 was lower due to the increase in diluted shares. Consensus (two estimates) was $0.31 and we were at $0.28. Excluding a $0.04 gain from an asset sale in Q1:11, EPS from operations were up 17.8%.
- We are maintaining our BUY rating and $23.00 price target and increase our estimates (2012 - $1.50 vs. $1.45) and (2013 - $1.65 vs. $1.63) on the heels of the better-than-expected Q1 performance.
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