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LPX Hits New 52-Week High

Zacks Equity Research

A premier supplier of building materials, Louisiana-Pacific Corporation (LPX) reached a new 52-week high of $19.08 on December 24, 2012, with a market cap of $2.62 billion.

The strong performance has been driven by an increase in demand in the housing market. With housing market recovery gaining momentum, there has been a drop in inventory levels and an increase in home prices. As such, most home building companies are gearing up to introduce a number of new homes in order to meet the increase in demand, which implies that demand for building materials has also improved.   

Third Quarter 2012 Recap

Louisiana-Pacific Corporation reported adjusted earnings per share (EPS) of 20 cents from continuing operations in the third quarter of 2012, missing the Zacks Consensus Estimate of 25 cents. Results, however, improved significantly from the prior-year quarter loss of 19 cents, owing to improved pricing in the Oriental Strand Board (:OSB) segment.

Net sales in the quarter improved 33% to $468 million, owing to higher volumes at OSB and Siding segments and price increases at the OSB segment. Revenues however, lagged the Zacks Consensus Estimate of $475 million.

Agreement of Estimate Revisions    

Over the last 60 days, 7 out of the 13 estimates for the fourth quarter of fiscal 2012 have gone up, following higher volumes at OSB and Siding segments and price increases at the OSB segment during the third quarter of 2012. Over the past 30 days, 2 estimates moved up while 1 estimate went up in the last 7 days. As a result of the upward estimate revisions over the past 60 days, the Zacks Consensus Estimate has gone up by 4 cents (or 40%) to 14 cents.

Of the 11 estimates for fiscal 2012, 7 moved up whereas 2 estimates moved down over the last 60 days. Over the last 30 days, 3 estimates for fiscal 2012 shot up while 1 went down. Only 1 estimate went up over the last 7 days .The Zacks Consensus Estimate for fiscal 2012 is 31 cents.

A peer of Potlatch Corporation (PCH), Louisiana-Pacific is optimistic about increase in housing construction activity and overall price appreciation of the housing market. However, the company is cautious about the slow global macroeconomic conditions, uncertain US economic recovery, sluggishness of remodeling industry, European crisis and slowing Chinese market.

We currently have a Neutral recommendation on Louisiana-Pacific. The stock carries a Zacks #3 Rank (short-term ‘Hold’ rating).

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