USG Jumps After Signaling First Profit Since 2007: Chicago Mover

USG Corp. (USG), the wallboard maker whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), rose to a one-year high after indicating it may achieve its first quarterly operating profit since 2007.

USG climbed 11 percent to $19 at the close in New York, the highest level since February 2011. Eagle Materials Inc. (EXP), a wallboard and cement maker, and Masco Corp. (MAS), producer of faucets and kitchen cabinets, also jumped after USG said sales gained 16 percent in the first two months this year.

The Chicago-based company said wallboard prices rose in January and February, suggesting the industry is rebounding after a housing crisis caused new home construction to plummet in the past years, slashing demand for the product. Housing starts in the U.S. hovered in February near a three-year high and building permits rose.

“New housing starts, existing home sales and an increase in the NAHB’s homebuilder confidence index all suggest that the housing market is experiencing a nascent recovery,” Robert C. Wetenhall, an analyst with RBC Capital Markets LLC, said in a report today. USG may gain the most from the rebound because of rising wallboard prices, he said.

USG reported preliminary operating profit of $5.7 million for January and February, compared with an operating loss a year earlier of $46.8 million. March results also “will reflect the continuing impact” of price and margin increases, USG said in a statement yesterday after the markets closed. The company has posted operating losses every quarter since the end of 2007.

Eagle Materials, based in Dallas, climbed 2.8 percent to $35.81, while Masco, a Taylor, Michigan-based company, advanced 3.6 percent to $14.10. The Standard & Poor’s 500 Index fell 0.2 percent.

High-Risk Appetite

USG said sales for January and February rose to $516.9 million from $446.9 million a year earlier. USG released the preliminary figures in connection with a tender offer to redeem $300 million of 9.75 percent notes. Full first-quarter results will be reported April 17.

Wetenhall said he recommends USG stock to “aggressive investors with a high risk appetite.”

Higher wallboard pricing during 2012 “represents an exceptionally powerful tailwind,” Wetenhall said in the report. “The stock will continue to work as long as year-over-year wallboard pricing trends remain favorable.”

In the first quarter last year, the company had an operating loss of $49 million and a net loss of $105 million, or $1.01 a share.

Berkshire Hathaway held 16.2 percent of USG’s outstanding shares as of Dec. 31.

To contact the reporter on this story: Thomas Black in Dallas at

To contact the editor responsible for this story: Ed Dufner at

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