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Louisiana-Pacific's (LPX) Stock Declines as Q3 Earnings Miss

Zacks Equity Research

Shares of Louisiana-Pacific Corporation LPX declined more than 4% on Nov 5 as it reported lower-than-expected third-quarter 2019 results. Both top and bottom lines lagged the Zacks Consensus Estimate and declined year over year. The downside was mainly due to lower oriented strand board (OSB) pricing across North American operations.

Adjusted earnings of 8 cents per share lagged the consensus mark of 18 cents by 55.6%. The bottom line also declined 90.4% from the year-ago figure of 83 cents. The downside can be attributed to lower sales, and higher costs and expenses.

During the quarter, the company reported net sales of $603 million, which missed the consensus estimate of $604 million by 0.2%, and year-ago figure of $737 million by 18.2%. Lower OSB prices (down 35%) and volumes (down 14%) negatively impacted its performance.

Louisiana-Pacific Corporation Price, Consensus and EPS Surprise

Louisiana-Pacific Corporation Price, Consensus and EPS Surprise

Louisiana-Pacific Corporation price-consensus-eps-surprise-chart | Louisiana-Pacific Corporation Quote

Segmental Analysis

Siding: The segment’s sales came in at $259 million during the quarter, up 7.5% from the prior-year figure of $241 million. Adjusted EBITDA, however, decreased 21.7% to $46 million.

OSB: Sales deteriorated 43.6% to $197 million. The company’s adjusted EBITDA was negative $1 million against $123 million reported a year ago. Decrease in selling price negatively impacted its overall results.

Engineered Wood Products: Sales fell 4.5% year over year to $105 million in the quarter. Adjusted EBITDA declined 40% to $6 million.

South America: Sales at South America of $36 million increased 2.9% year over year. However, adjusted EBITDA of $7 million fell 22.2%.

Operating Highlights

Gross profit totaled $75 million, declining 64.8% year over year. Selling, general and administrative expenses, as a percentage of revenues, increased 270 basis points.

Adjusted EBITDA from continuing operations was $49 million in the quarter, down 74.6% from prior-year quarter. Adjusted EBITDA margin also contracted significantly to 8.1% from 26.2%.

Financials

As of Sep 30, 2019, Louisiana-Pacific had cash and cash equivalents of $304 million compared with $878 million at the end of 2018. Long-term debt (excluding current portion) of $348 million was slightly above the 2018-end level of $347 million.

At the end of the third quarter, net cash provided by operations was $59 million compared with $151 million a year ago.

2019 View & Strategic Update

Based on current plans and expectations, as well as certain costs that are likely to impact results, Louisiana-Pacific lowered its full-year 2019 guidance for capital expenditure. The company now expects capital expenditure to be less than $160 million compared with $160-$170 million estimated earlier.

Louisiana-Pacific maintains its SmartSide Strand revenue growth target of 10% for 2019 and 10-12% for the long term.

Within 2021, the company expects EBITDA to grow approximately $75 million, aided by overall equipment effectiveness (OEE) and supply chain optimization of $28 million in the first nine months of 2019.

Zacks Rank & Peer Releases

Louisiana-Pacific, which shares space with Norbord Inc. OSB in the Zacks Building Products - Wood industry, currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Universal Forest Products, Inc. UFPI reported mixed results in third-quarter 2019, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. This marked the third straight quarter of earnings beat and the second consecutive quarter of revenue miss.

Weyerhaeuser Company WY reported mixed third-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate, while net sales beat the same. The company’s top and bottom line declined from the year-ago quarter. Its two major segments reported significantly lower net sales on a year-over-year basis.

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