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Resolute Forest Products Inc. (RFP)

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15.64-0.40 (-2.49%)
At close: 4:00PM EDT

15.69 +0.05 (0.32%)
After hours: 7:55PM EDT

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  • B
    Brad
    Looks like there are numerous reports of mills being sold out of inventory all the way through end of the summer now. This should continue to bode well for RFP. No one can get supply and prices will remain high. Plus if they are sold out through summer now and demand keeps building, they could be sold out for a long while and the mills might have a hard time catching up for a while.
    Bullish
  • B
    Brick
    So impressed with this rebound! The fight on this stock!!
    Props to all those who held through!
  • R
    Richard
    Strictly by the number of the two biggest producers of lumber BCC and WY each have a forward PE of 15. If RFP had the same forward PE its stock price would be over $40.00. RFP is the most undervalued 'Real" asset in the market!
  • 1
    1%
    I really see nothing to slow the building boom down and the price of lumber with the current building boom in Florida and Texas as people flee Blue progressive STATES. Here come hurricane season.

    Dangerous and very active Atlantic hurricane season 2021 expected: Above-average probability for major hurricanes making landfall along the continental US coastline. After the record-breaking Atlantic hurricane season last year, it appears likely that 2021 is in for the sixth consecutive above-average year. Apr 19, 2021
    Bullish
  • S
    Smurf
    Some reaction to Resolute hedging strategy in the media today;

    Resolute just lost a very big bet.

    While the company had a $87-million profit in the fiscal first quarter, up from a $1-million loss in the same period a year ago, it could have easily made a lot more money by simply following conventional wisdom.

    As the price of lumber tripled since June, Resolute decided to hedge some of its production by locking into futures contracts. It turned out to be a costly move, with a $37-million loss on the contracts in the first quarter.

    Unlike most other commodities, very little lumber production is hedged, making Resolute an outlier, Mason said. Few retail investors had likely realized the Montreal-based company was even hedging before buying its shares, he added.

    “People buy commodity company shares based on the value of the underlying commodity. Then they went and hedged, and lost $37 million. It’s not a good look with investors,” Mason said. “They made good money on lumber. But they could have made a lot more.”

    Even if the bet had turned out to be correct, it wouldn’t have meant good news for Resolute shareholders, he suggested.

    “If their hedges had been right, it would have meant the price of lumber had fallen so people would have sold off their shares anyway,” Mason argued.

    Bottom line

    Canfor is bigger, more profitable, and making better decisions — at least lately — than Resolute. The hedging loss, especially, will disappoint Resolute investors who had been drawn in by the company’s shuttering of several pulp and paper mills, including one in Baie-Comeau, Que., said Mason, managing director of ERA Forest Products Research.

    “They’d been backing out of the pulp and paper market, because it’s less lucrative, and the paper market is shrinking. They used to be the biggest supplier of newsprint in the world. So a lot of people thought ‘great, they’re focusing more on lumber.’ And then they did this.”
    Bullish
  • V
    Vince
    Looks like the big fellas were a little concerned with the drop in lumber futures
  • w
    wiley
    Bring on the Domtar deal for RFP. It’s not being stolen. Assuming $55/share, that’s a $3.3B takeover considering debt. UFS is a lesser business than lumber or even NBSK pulp — paper had no real boom — its paper man. Earnings forecasts are $400 to $500M for Domtar annually long run and now. Assuming the high end, generously, you’re a 6.7x valuation.

    RFP is a billion dollar business now. That’s likely the floor. We are just acclimating to this. This assumes NBSKs new use cases and dismal long run returns mean the assets can produce long run $200m earning or $142 per ton margins. I expect Q2 is more like $300 margins and Q3 at least $400.

    The extra $800m? That’s assumes long run lumber at $750 US. See the upside? That gives $320 margins at a meagre 2.5 billion feet.

    Give me a 6.7x on that and it’s $88/share assuming. 79m. The trick is, if this is likely, don’t F around on pulp capex etc but do a substantial issuer bid. Get 30% of shares put to bed. I think that’s a reasonable outcome announced for Q2.

    The above math at 55 million shares? That’s $120 a share.

    I dont know what the math is on the calls I hold, but I’m already well up on this name. Even at $88/share it’s like I’m suddenly a 20-goal scorer in the NHL on a one year contact. That’s a heavy duty 7 figure upside, but I’m lucky/risk tolerant/bold in concentrating at the investing levels I see suitable here. That’s not showboating but just time in the market (as opposed to timing — I laugh at the retail guys BS bemoaning “ohhh I’m adding on weakness”). My view is go big. I had to sell some other good names with big upside yesterday (Interfor, trimmed elsewhere) to make an already concentrated position is this even more concentrated. Well, and get heavier options upside for post Q2 as these are not priced correctly IMO — they literally are priced by guys who can’t do the math on escalating earning over a declining share base.

    So, concentration it is. That’s how to make a huge haul (but it’s also a great way to lose big if done poorly). The odds are so stacked here. It was the stuff of fiction before, but if my previous math used long run $850 lumber or $950 lumber... which is the inflation adjusted 70 year norm so not a black swan as per the absolutely analytically devoid commentators in media and stubborn bank analysts, big things happen. That’s a $8.4B or $10.0B takeover value. They jives with sum of parts value, albeit not cutting in in half or more like I do to be conservative. Do the math on a $10.0B takeover over 55M shares. Who wants $183/share US? It sounds obscene but you decompose things it’s possible. It’s extremely contrarian. I am not forecasting this as it’s predicated on, one year form now, the lumber prices not collapsing to $400 like the bankers still insist is imminent
  • S
    Smurf
    Analyst comments :

    RBC Dominion Securities analyst Paul Quinn called Resolute Forest Products Inc. (RFP-N, RFP-T) “The Comeback Kid” despite reporting first-quarter results that missed his expectations.
On Thursday, Montreal-based Resolute reported adjusted net income and adjusted EBITDA of US$119-million and US$189-million, respectively, missing the analyst’s projections of $140.7-million and $228-million.
“Resolute Forest Products Inc. reported Q1 results that were below our forecast, largely due to a combination of lumber shipments that slipped into Q2, increased production costs, and lower CEWS payments from the Canadian government,” said Mr. Quinn. “With key lumber and pulp markets in high gear, we think that today’s pullback presents a great opportunity to add. Longer-term, we think that the company’s transition away from paper markets has been accelerated by the pandemic, which should allow for a re-rating of its shares.”
Moving forward, the analyst said it’s “all about wood products in the near-term.”
“With record lumber pricing, we estimate that the wood product business is generating more than $25-million of EBITDA every week (ex. duties) while prices remain greater than $1,000 per thousand board feet (mfbm),” said Mr. Quinn. “At that rate, Resolute could generate greater than $1.0-billion of EBITDA during the year(more than $13 per share). At most recent pricing (E.SPF 2x4s were at $1,370/mfbm as of last Friday in cash markets), back of the napkin math suggests that Resolute is making over $40-million per week, which works out to 54 cents per share. While we forecast pricing will move lower in the back half of the year, every week at these levels makes it more likely that our estimate will be too low.”
Seeing it’s balance sheet “in the best spot it’s been in over the last 20-plus year,” Mr. Quinn raised his target for Resolute shares to US$16 from US$13, reiterating an “outperform” recommendation. The average is currently US$16.50.
“It’s been quite a turnaround at Resolute, after we were fielding calls a year ago asking if they would have enough liquidity to make it through the pandemic,” he said. “Not only have they made it, they’ve thrived as lumber prices have soared, and now the pulp business looks to be back on track. We expect key priorities include: 1) capex; 2)share repurchases; and, 3) lumber &pulp M&A. We’d like to throw another idea out there – LP’s EWP business is still up for sale, which could be a good addition for Resolute given that the two companies already operate a JV I-joist facility in Quebec. We value LP’s EWP business at $150-million, but think it could sell for up to $200-million in a strong market.”
Elsewhere, seeing an attractive entry point for investors, CIBC World Markets analyst Hamir Patel increased his target to US$16 from US$14 with an “outperformer” rating.
“While demand for graphic papers has undergone a multi-year permanent decline during COVID, we believe Resolute has a solid track record of generating cash from its paper operations and monetizing them where appropriate,” said Mr. Patel
  • R
    Richard
    If just 5% of current holders went on other boards to proclaim these facts the value of RFP would double in no time!
  • S
    Smurf
    The Financial Post reports in its Friday edition that lumber demand is so strong that Resolute Forest Products' order book exceeds its inventory, according to chief executive officer Remi Lalonde. A Bloomberg dispatch to the Post says that after trucking and rail car shortages hampered shipments during the first quarter, Resolute is now holding extra inventories at a time of record wood prices, Mr. Lalonde told analysts on a conference call Thursday. Still, even those stockpiles are not enough to satisfy the North American building boom, so Resolute is increasing output. Full-year production is expected to rise by 7 per cent. Lumber futures have surged 85 per cent this year on sky-high demand from home builders and remodellers. "We're selling volume that we haven't sawed yet," the CEO said. The inventory rise during a price rally was "kind of a happy accident." Investors punished Montreal-based Resolute for posting adjusted per-share profit that trailed every analyst estimate compiled by Bloomberg. Executives cited transport snags for the underperformance. To boost output, Resolute restarted an Ontario mill idle for two years, as well as one in Arkansas. Resolute closed Thursday at $16.12, down $2.95 in Toronto.
  • j
    john
    lumber prices are not going to level off anytime soon.. the avg cost of a house has increased 35k over the last year or so..big deal..thats half a tesla....lumber and homes are rising to fair mkt value as the country and the world as a WHOLE be come more conservative and more practical..pandemics will do things like that... im not a economist or a balance sheet reader.. ive just been on the planet a long time...35k in crease in the cost of new construction doesnt mean people are going to pay the money..it just means they are going to drive the old car a lot longer..vacation a little less and re allocate resources towards a quality life and not a life centered around toys and gimmicks. limit up!!!
    Bullish
  • M
    Matthew
    And here we are... 9 days later... right where we were before earnings...
    Great job analysts and trading robots... real clever stuff going on in high finance
  • B
    BuyoutCandidate
    Some of you may have heard them use the term “Spring Break Up” during the conference call as contributors to delays in getting product to market, along with railcar shortages.

    Most of you in the north know what that is, but for the benefit of southerners like myself, the harsh winters make the grounds rock hard, and with the change in seasons and snow melt, rains etc, the ground starts to break up and saturate, leaving everything a muddy mess.

    Imagine driving massive logging trucks through this stuff, and also the laborers who operate the equipment and their walking through mud with caked on boots weighing several pounds more than usual.

    It seems like a little issue, but having seen it first hand on my last visit to northern idaho, you can begin to understand that natural weather interruptions are to be expected and that it is being worked on as fast as possible. The accusation from an earlier poster that this is a company unable to get product to market is kinda erroneous and does not consider how to extreme weather affects execution.

    Texas and Arkansas had big freezes too in January that were more severe than usual.

    I also thought it was interesting one of their paper mills that they closed was costing $2M a Month in heating costs. That’ll be $6M not spent next quarter.

    Anyway, “Spring Break Up” is a good term to be familiar with. Look it up sometime.
  • F
    FTW
    My broker called me after hours his firm was buying RFP all day yesterday so he added 5,000 shares to my account.
    This guy has a hot hand at trading he’s good. He also sent me this.

    Good Luck

    https://www.wthr.com/mobile/article/news/local/projects-put-on-hold-as-lumber-prices-soar-cost-home-building-sales-habitat-for-humanity/531-06fc08ce-af41-49e6-83cb-84ae18aad988
    Bullish
  • 1
    1%
    You do what you want I saw the dip and bought RFP based on building trends and hurricane season odds.
    I beat big money to this hurricane reality which will drive lumber prices even higher.

    WE KNOW

    Other 2021 predictions from CSU: * 69 percent chance that a major hurricane will hit somewhere on the U.S. coast (average is 52 percent). * 45 percent chance that a major hurricane will hit the U.S. East Coast, including the peninsula of Florida (average is 31 percent).Apr 12, 2021
    Bullish
  • w
    wiley
    Oh man. I was wrong in a big way**

    For Q1, but no lingering issues other than some hedging issues. Moreover much comes back into an already strong Q2. The 50mmfbm produced (costed) but not shipped is massive. Those are costs on the books eaten without then associated $45m us in revenue gained. That’s just a free hit for Q2, and it could be more like $70m extra if sold at $1400 not $900.

    Pulp wow, no action at all. Well, the gain I thought for Q1 happens in Q2, and this just means Q3 is not massive. Amazed on the drop. I got nothing there save for needing a drink.
    Bullish
  • m
    matt
    Lumber futures is such a beautiful thing to see and know that RFP is just printing cash daily. Throw in those pulp price increases and this is very exciting times for RFP. Wonder how long until we see 20 a few weeks or months?
    Bullish
  • B
    Brad
    No mention of their Toundra Joint Venture in the earnings release. That's actually a pretty decent asset around one plant, the thought is they could expand to this model or JV to other plants too and also reduce their CO2 footprint.
  • B
    Brad
    Lumber is limit up again with new higher daily limits of $42. There's no limit on the May contract now and it's up $99.
    Bullish