) gained significant momentum after acquiring the remaining shares
in the Peace Valley joint venture from its partner, Canfor
Corporation. This Zacks Rank #1 (Strong Buy) building products
company also reported solid third quarter results in early November
thanks to improving housing fundamentals, and is poised to perform
well when it reports in February. Earnings estimates have been
advancing sharply, leading to significantly higher year-over-year
growth rates for fiscal 2013 and fiscal 2014.
Acquisition of Peace Valley Mill
In the fourth quarter of 2012, Louisiana-Pacific Corporation
acquired Canfor Corporation's 50% share in the Peace Valley
Oriented Strand Board (OSB) joint venture, which was previously
owned by both the companies. Louisiana-Pacific paid $75 million for
this mill located in Fort St. John, British Columbia and thereby
became the sole owner.
The Peace Valley acquisition will strengthen production capacity of
LPX's OSB segment, which manufactures and distributes OSB
structural panel products. The segment is already doing well with
sales growing in the third quarter of 2012, owing to an increase in
housing activity that is driving both volume and pricing growth.
Bright Outlook for Upcoming Quarter
Louisiana-Pacific will report its fourth quarter results on Feb 8.
The current Zacks Consensus Estimate is 20 cents per share. With a
good Zacks Rank and Earnings Expected Surprise Prediction (ESP)
Zacks Earnings ESP: A Better Method
) of 5.0%, Louisiana-Pacific looks poised to beat the Zacks
Consensus Estimate in the quarter.
Louisiana-Pacific's third quarter 2012 adjusted earnings per share
of 20 cents was a turnaround from last year's loss of 19 cents.
Improved pricing and volume growth in its largest segment, OSB,
drove the earnings beat. Net sales in the quarter improved 33% to
$468 million, owing to higher volumes at OSB and the Siding
segments, as well as price increases at the OSB segment.
The U.S. housing industry is improving steadily. Demand for new
home construction is gaining traction, which is leading to higher
demand and improved pricing for Louisiana-Pacific's building
materials products. Furthermore, management believes that they have
ample capacity in each of their business segments, which can be
utilized as market demand improves.
Earnings Estimates Jumping
Over the last 60 days, the Zacks Consensus Estimate for fiscal 2012
has advanced 27.6% to 37 cents, reflecting year-over-year growth of
136.9%. The Zacks Consensus Estimate for fiscal 2013 advanced 51.6%
to 97 cents over the same time frame, suggesting year-over-year
growth of 166.1%.
Louisiana-Pacific has an attractive valuation and currently trades
at a forward price-to-earnings (P/E) of 21.70x, a discount of 33.5%
to the peer group average. On a price-to-sales and a price-to-book
basis, the stock is trading at discounts to industry averages.
Shares of Louisiana-Pacific have been rising consistently since
early June 2012 and reached a 52-week high of $21.39 on Jan 9,
2013, a few days after the Peace Valley announcement. The stock
price has almost tripled since the Sep/Oct 2011 lows, when the
housing market was fragile.
Moreover, the stock is currently trading above its 50- and 200-day
moving averages, which stand at $18.26 and $13.22, respectively. In
fact, the stock has been consistently trading above its 50-day
moving average since early Oct 2012 and the 200-day moving average
since the end of Feb 2012.
Volume averages roughly 1860K daily. The year-to-date return for
the stock is 9.21%, compared with the S&P 500's return of
Based in Nashville, Tennessee, Louisiana-Pacific Corporation is
engaged in the manufacture and distribution of oriented strand
board, engineered wood products, siding, decking, molding, and wall
coverings at facilities throughout the United States and Canada.
The market cap of the company is $2.91 billion.
With the overall housing market improving steadily, there are many
building products companies that are currently performing well,
have a bright outlook and are worth considering. These include
Potlatch Corporation (
) - Zacks Rank #1 (Strong Buy) and Weyerhaeuser Co. (
) - Zacks Rank #2 (Buy). Construction materials company Eagle
Materials Inc. (
) - Zacks Rank #1 (Buy) is also worth a look.
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