Bull of the Day: Louisiana Pacific (LPX)

Brian Hamilton
Updated

Hurricane Matthew roared its way through Haiti, bashed the Bahama Islands, and did some significant damage from Florida all the way up through North Carolina.   Currently, thousands of people are still without power, and flooding is wreaking havoc throughout the region.  Due to the severity of the damage, thousands of homes, schools, and other structures will need to be rebuilt across several states.  This is where our Bull of the Day Louisianan Pacific (lpx) comes into play.  

This Zacks Rank #1 (Strong Buy) company manufactures building materials and engineered wood products in the United States, Canada, Chile and Brazil. The Company's products are used by homebuilders and light commercial builders. Louisiana-Pacific's products include oriented strand board sheathing, flooring, radiant barrier panels, siding and trim, I-joists, laminated veneer lumber, laminated strand lumber and interior decorative moldings.

Recent Earnings

In their most recent earnings report, the company beat both the Zacks consensus earnings and revenue estimates (LPX has beaten the Zacks earnings estimates for three consecutive quarters).  On a year over year basis, management saw sales increase +18.1%, and net income came in at $32 million, ahead of a net loss of $20 million (in Q2 2015).  

Also, LPX has 4 major segments, all of which saw year over year net sales improvements.  The Oriented Strand Board (OSB) segment up +19.9%, Siding Segment improved by +26.2%, Engineered Wood Products (EWP) segment reported a +8% increase, and the South American segment improved +5.1%.  

Management’s Take

According to Curt Stevens, CEO, “This was an outstanding quarter for LP as every one of our segments helped drive net income of more than $30 million. OSB had adjusted EBITDA of $59 million and our Siding segment had nearly $50 million of adjusted EBITDA. These results were due to higher OSB pricing, slightly improved housing starts and lower production costs across our system.”

Price and Earnings Consensus Graph

As you can see in the graph below, LPX has seen both their stock price and future estimates rise since the beginning of 2016.

Increasing Estimates

Due to the company’s strong Q2 performance, earnings estimates for Q3 16, Q4 16, FY 16 and FY 17 have all seen upgrades over the past 30 days.  Q3 16 rose from $0.32 to $0.40, Q4 16 improved from $0.18 to $0.22, FY 16 increased from $0.81 to $0.93, and FY 17 jumped up from $1.28 to $1.50.  

Bottom Line

While hurricane Matthews has destroyed many lives and communities, Americans always rebuild, and due to the damage there will be a lot to rebuild in several states.  Therefore the demand for Louisiana Pacific’s products will increase, which in turn will help both the top and bottom lines for the company.  

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