We expect Louisiana-Pacific Corporation (LPX) to beat expectations when it reports first quarter 2013 results on May 7.
Why a Likely Positive Surprise?
Our proven model shows that Louisiana-Pacific is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Louisiana’s Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +9.76%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Louisiana-Pacific carries a Zacks Rank #1. Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Louisiana-Pacific’s Zacks Rank # 1 (Strong Buy) and +9.76% ESP makes us very confident in looking for a positive earnings beat on May 7.
What is Driving the Better Than Expected Earnings?
Louisiana-Pacific has been witnessing volume and pricing growth in its the Oriental Strand Board (:OSB) and Siding segments. Further improvement in the housing market is expected to boost further volume and pricing growth in the upcoming quarters.
Louisiana-Pacific is optimistic about the growing housing construction activity and intends to increase its investment in its facilities despite a poor job market, federal deficit and uncertain credit availability in the U.S. The company entered into an agreement with Canfor Corporation to acquire the latter’s 50% share in the Peace Valley Oriented Strand Board (:OSB) mill during fourth quarter 2012, which both the companies jointly owned. Louisiana-Pacific’s OSB segment is expected to benefit from the acquisition in the near future. It will increase the production capacity of the segment, thus improving its ability to benefit from the improving demand for OSB products driven by improving housing market.
Other Stocks to Consider
Louisiana-Pacific is not the only firm looking up this earnings season. We also see likely earnings beat coming from these 3 companies from service sector:
Weyerhaeuser Co. (WY), Earnings ESP of +3.13% and Zacks Rank #2 (Buy)
Martin Marietta Materials Inc. (MLM), Earnings ESP of +4.27% and Zacks Rank #3 (Hold)
Williams-Sonoma Inc. (WSM), Earnings ESP of +5.56% and Zacks Rank #3 (Hold)
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