We expect the premier supplier of building materials, Louisiana-Pacific Corporation (LPX) to beat expectations when it reports fourth quarter 2012 results on Feb 8.
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: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), is at +5.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Louisiana-Pacific currently carries a Zacks Rank # 1(Buy). Note that stocks with a Zacks Rank #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 an ESP of +5.00% makes us very confident in looking for a positive earnings beat on Feb 8.
What is Driving the Better Than Expected Earnings?
With the improving housing market, there is an increase in new home construction activities, which is boosting demand for Louisiana-Pacific’s products. The company is witnessing volume and pricing increases in the Oriental Strand Board and Siding segments, which resulted in double digit sales rise in both the segments in the third quarter of 2012.
The company’s OSB segment is expected to benefit from the acquisition of the remaining shares in the Peace Valley joint venture from its partner, Canfor Corporation as it will strengthen production capacity of the segment.
Louisiana-Pacific is optimistic that further increase in housing construction activity and overall price appreciation will boost top line growth of the company in the immediate quarters.
Estimates are mostly seeing an upward trend ahead of the fourth quarter results.
Other Stocks to Consider
Louisiana-Pacific is not the only housing company looking up this earnings season. Other stocks that deserve a mention include:
Potlatch Corporation (PCH), Earnings ESP of +4.35% and Zacks Rank #3 (Hold)
Weyerhaeuser Co. (WY), Earnings ESP of +10.53% and Zacks Rank #2 (Buy).
NVR Inc.(NVR), Earnings ESP of +10.12% and Zacks Rank #1 (Strong Buy).
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