Morningstar Rating

Stock Research and Analysis

by James Krapfel, CFA

Bulls Say

USG should have strong cyclical tailwinds given its heavy exposure to U.S. residential and nonresidential construction starts, which remain approximately 40% and 30% below midcycle levels, respectively.
USG’s UltraLight technology should allow the company to enjoy some premium pricing and possibly take market share on wallboard and related gypsum products.
Wallboard industry consolidation should lead to a more rational wallboard pricing environment, leading to improved margins and ROICs this cycle versus the last. Read more 

Bears Say

USG’s building products are largely commoditized, making economic profit generation difficult over a full market cycle.
L&W, USG’s building products distribution business and 30% of revenue, is likely to be an ongoing drag on profitability absent a strong commercial construction recovery.
Cyclicality is paramount in this industry with wild swings not only in industry volumes, but also pricing, with peak-to-trough revenue down 50% last cycle. This can be a very difficult business to manage through a cycle. Read more 

Management

USG has been led by the company veteran James Metcalf since 2011, replacing retiring CEO William Foote who led USG for more than a decade and guided the company through some of the most difficult periods in its history (including its self-declared bankruptcy   Read more 

Profile

USG is a manufacturer and distributor of building materials, most notably drywall and joint compound, for use in new residential, new nonresidential, and residential and   Read more 

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