The company highlighted in this week’s Stock of the Week makes products that literally are all around you, though you probably don’t realize it.
USG Corporation (USG) is a narrowly focused construction-materials company that just sold off a substantial chunk of its business to improve its balance sheet. USG makes the Sheetrock, Durock and Fiberock brands of gypsum wallboard that are used in constructing walls, ceilings, roofs and floors of residential, commercial and institutional buildings. It also is a leading manufacturer of ceiling tiles.
USG gets 85% to 90% of its revenue in North America—and about 85% of all its business is wallboard. So it is little affected by international events or currency issues, and it should be helped if President Donald Trump’s plans to improve the US infrastructure move forward.
It recently sold its L&W Supply distribution business for $670 million, using the proceeds to pay down a large part of its $1 billion in debt. This gives USG a much stronger balance sheet and frees up cash for capital spending and a planned $250 million share-repurchase program. The divestiture will, however, reduce this year’s revenue. Revenue was $3.5 billion in 2016 and should be $3.1 billion this year and $3.3 billion in 2018.
Fiscal year: Dec. Earnings per share: 2018 est./$2.30…2017 est./$2…2016/$1.70.
This Week’s Expert
Peter Tuz is president of Chase Investment Counsel, which manages $355 million, and portfolio manager of the $75 million Chase Growth Fund (CHASX) and $25 million Chase Midcap Growth Fund (CHAMX), Charlottesville, Virginia. ChaseInv.com