Louisiana-Pacific (LPX) Hits a 52-Week High: What's Driving It?
Louisiana-Pacific Corporation LPX touched a new 52-week high of $76.32 on Jul 03. The stock pulled back to end the trading session at $74.59, down 0.52% from the previous day’s closing price of $74.98.
LPX has gained 38.2% in the three months period compared with the Zacks Building Products - Wood industry’s growth of 16.3%, the Zacks Construction sector’s increase of 22.3% and S&P 500 Index’s growth of 8.8%.
Image Source: Zacks Investment Research
Growth Catalysts
The price surge can be attributed to positive trends in the U.S. construction sector, driven by increased building permits, housing starts and completions. This highlights favorable market conditions and rising demand, contributing to the surge on prices. The encouraging trends reflect a thriving construction market, presenting opportunities for investors and homebuyers.
Louisiana-Pacific's siding unit, which contributed 38% to sales in 2022, increased 26% year over year. In first-quarter 2023, the unit generated flat year-over-year sales. Also, LPX invested $114 million in CapEx for converting Sagola to Siding. Sagola's conversion adds 330 million square feet of siding capacity, bringing total capacity to about 2.3 billion square feet and reducing the OSB capacity to about 4 billion square feet. The company is committed to growing strand Siding revenues in 2023 and beyond. It intends to continue investing in selling and marketing the said business.
The company has been making efforts to increase penetration of Siding products in repair/remodel and roll out SmartSide products. It exited the fiber product line to focus more on higher-margin SmartSide strand products. Also, it launched ExpertFinish within the Prefinish product line. The company has been witnessing higher-than-expected demand for Smooth SmartSide and ExpertFinish. The company recently announced the expansion of Siding Capacity with the production restart at Peace Valley.
Siding is less sensitive to new housing market cyclicality as more than 50% of Siding Solutions demand comes from other markets like sheds and repair and remodeling. The company believes that the long-term market trends and demographics indicate continued growth in demand for sustainable engineered wood siding in these markets.
Louisiana-Pacific and other manufacturers of wood building materials are expected to benefit from strong global trends. The company is focused on improving business by growing the Siding unit and simultaneously reducing cost. The company has been mainly focusing on three areas — increasing the efficiency of mills by improving productivity, run time and quality through overall equipment effectiveness or OEE initiatives; applying best practices to its supply chain; and optimizing infrastructure costs.
Zacks Rank & Key Picks
Louisiana-Pacific currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Construction sector are:
Dycom Industries, Inc. DY sports a Zacks Rank #1 (Strong Buy). DY has a trailing four-quarter earnings surprise of 153.7%, on average. Shares of DY have gained 22.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for DY’s 2024 sales and earnings per share (EPS) indicates a rise of 8.3% and 41%, respectively, from the year-ago period’s levels.
Eagle Materials Inc. EXP sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 6.5%, on average. Shares of EXP have increased 67% in the past year.
The Zacks Consensus Estimate for EXP’s 2024 sales and EPS indicates a rise of 2% and 8.4%, respectively, from the year-ago period’s levels.
Martin Marietta Materials, Inc. MLM flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 31%, on average. Shares of MLM have increased 48.1% in the past year.
The Zacks Consensus Estimate for MLM’s 2023 sales and EPS indicates a rise of 18.4% and 31.7%, respectively, from the year-ago period’s levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Louisiana-Pacific Corporation (LPX) : Free Stock Analysis Report
Martin Marietta Materials, Inc. (MLM) : Free Stock Analysis Report
Eagle Materials Inc (EXP) : Free Stock Analysis Report
Dycom Industries, Inc. (DY) : Free Stock Analysis Report
