Louisiana-Pacific Reports Mixed 4Q - Analyst Blog

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Louisiana-Pacific Corporations ( LPX ) reported adjusted earnings per share (EPS) from continuing operations of 18 cents in the fourth quarter of 2012, missing the Zacks Consensus Estimate of 20 cents per share by 10%.

Earnings, however, turned around from the prior-year quarter loss of 33 cents owing to improved pricing in the OSB segment and solid results in the Siding segment. With the improving housing market, there is an increase in new home construction activities, which is boosting demand for Louisiana-Pacific's products.

Net sales in the quarter improved 47% to $459 million, owing to double-digit volume increase at OSB and Siding segments and price increases at the OSB segment. Revenues beat the Zacks Consensus Estimate of $437 million by 5.03%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $71 million versus a loss of $12 million in the prior-year quarter, driven by strong net sales rise.

Segment Details

Oriental Strand Board (OSB): The OSB segment manufactures and distributes OSB structural panel goods.

Sales in the segment grew 86% to $243 million in the quarter driven by 64% increase in pricing as the housing market gained momentum. The improved housing market also resulted in volume growth of 16% for the segment. The segment recorded adjusted EBITDA of $68 million much higher than a loss of $5 million in the prior-year quarter attributable to pricing benefits.

Composite Wood Products/Siding: The Composite Wood Products/Siding segment is engaged in the production and marketing of SmartSide and CanExel siding products and commodity OSB. These products are used for new constructions as well as for repair and remodeling.

Sales in the Siding segment improved 25% to $117 million benefiting from improved pricing and double-digit increase in volume in the quarter.

Driven by the housing market recovery momentum, SmartSide volumes improved 19% year over year and CanExel siding volume was up 27%. The segment recorded adjusted EBITDA of $15 million in the quarter, up 50% from the prior-year quarter.

Engineered Wood Products (EWP) The EWP segment produces goods used in new constructions like I-Joist (IJ), Laminated Veneer Lumber (LVL) and Laminated Strand Lumber (LSL).

Engineered Wood Products sales increased 11.0% year over year to $52 million in the quarter. Volumes of I-Joists were up 2% owing to improving housing demand while volumes of LVL and LSL were up 14% year over year. Pricing was up 5% in I-Joists, and down 1% in LVL and LSL, due to changes in product mix. The segment's adjusted EBITDA was a loss of $1.7 million compared to the prior-year loss of $1 million in the prior-year quarter.

South America: The segment manufactures OSB structural panels and siding products in Chile and Brazil. Segment sales surged 23% to $42 million. Volumes in Chile were up 13% on the back of strong demand for wooden housing while volumes in Brazil were up 14% attributable to greater penetration of the local market. Driven by changes in foreign exchange rates, prices increased 18% in Chile and declined 4% in Brazil. In terms of local currency, prices improved 11% in both Chile and Brazil. The segment's adjusted EBITDA of $10 million grew more than twofold on a year-over-year basis from $4 million in the prior-year quarter.  

Peace Valley Acquisition

During fourth quarter 2012, Louisiana-Pacific entered into an agreement with Canfor Corporation (CFP.TO) to acquire the latter's 50% share in the Peace Valley Oriented Strand Board (OSB) mill, which both the companies jointly owned. Louisiana will pay $75 million for this mill and will thereby become the sole owner. Louisiana-Pacific's OSB segment is expected to benefit from the acquisition. It will increase the production capacity of the segment, thus improving its ability to benefit from the improving demand for OSB products driven by improving housing market.  

Fiscal 2012

The company reported adjusted earnings per share (EPS) from continuing operations of 35 cents in fiscal 2012, missing the Zacks Consensus Estimate of 37 cents per share by 5.4%. Earnings, however, turned around from the prior-year's loss of 73 cents owing to improved pricing in the OSB segment.

Net sales in the quarter improved 27% to $1.7 billion, owing to higher volumes at OSB and Siding segments and price increases at the OSB segment. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $203 million versus a loss of $5 million in the prior-year.

Outlook

Louisiana-Pacific is optimistic about its liquidity position and increasing momentum of the housing market in fiscal 2013 and intends to increase its investment in its facilities despite poor job market, federal deficit and uncertain credit availability in the U.S. The company anticipates higher cost of raw materials in the first quarter of 2013.

Louisiana-Pacific carries a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider  

Many other stocks in the broader sector are currently performing well. These include NVR, Inc ( NVR ) with a Zacks Rank #1 (Strong Buy) and The Ryland Group, Inc. ( RYL ), and D.R. Horton Inc. ( DHI ) with a Zacks Rank #2 (Buy).



D R HORTON INC (DHI): Free Stock Analysis Report

LOUISIANA PAC (LPX): Free Stock Analysis Report

NVR INC (NVR): Free Stock Analysis Report

RYLAND GRP INC (RYL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DHI , EPS , EWP , IJ , LVL

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