It has been about a month since the las t earnings report for Louisiana-Pacific (LPX). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Louisiana-Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recen t earnings report in order to get a better handle on the important catalysts.
Louisiana-Pacific's (LPX) Q4 Earnings & Revenues Lag Estimates
Louisiana-Pacific Corporation reported fourth-quarter 2018 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Nevertheless, shares of the company rallied nearly 10% during yesterday's trading session, after it increased quarterly cash dividend by 4% to 13.5 cents per share and announced a new share buyback program.
Adjusted earnings of 19 cents per share missed the consensus mark of 30 cents by 36.7%. Also, the reported figure declined 73.2% from the year-ago level of 71 cents. The downside can be attributed to macro environment headwinds, coupled with higher costs and expenses.
Net sales of $589.1 million in the quarter lagged the consensus mark of $618 million by 4.7%. The said figure decreased 17% from $710.6 million on a year-over-year basis. Lower OSB prices, volumes along with EWP sales negatively impacted the company's top-line performance.
Adjusted EBITDA from continuing operations came in at $65 million in the quarter, down 68% from $203 million in the prior-year period. Adjusted EBITDA margin contracted 1750 basis points (bps) to 11% from 28.5% recorded in the prior-year period.
Siding Segment : The segment recorded sales of $212.9 million, marginally higher than the prior-year figure of $212.8 million. Meanwhile, the segment recorded adjusted EBITDA of $42 million, reflecting a decline of $11 million from the prior-year figure of $53 million.
The downside primarily stemmed from higher marketing investments related to repair and remodel channel penetration, coupled with new product introductions. Interruption at its SmartSide Fiber and CanExel facilities, as well as Dawson Creek mill conversion added to the woes.
OSB: Sales at the OSB segment decreased 29% year over year to $255.4 million. OSB pricing accounted for $92 million of the decline, while the remaining was due to lower volumes. The company recorded an increase in raw material costs, primarily resin.
In the quarter, adjusted EBITDA of $41 million fell 73.3% from the year-ago level due to unfavorable selling prices.
Engineered Wood Products (EWP): EWP sales declined 17% year over year to $76.3 million in the quarter. Adjusted EBITDA also decreased $5 million from the prior-year quarter.
South America: This segment comprises facilities in Chile, Brazil, as well as sales offices in Peru and Argentina. The segment's sales were down 5% year over year to $38.6 million. Adjusted EBITDA was $8 million compared with $10 million in third-quarter 2017.
Other: Net sales were $6 million in the quarter compared with $7.7 million a year ago.
During the quarter, inter-segment sales were 0.1 million.
Louisiana-Pacific ended the quarter with cash and cash equivalents of $878.4 million as of Dec 31, 2018 compared with $928 million in the corresponding period of 2017. Long-term debt (excluding current portion) was $346.9 million, down from $350.8 million at the end of 2017.
Net cash provided by operations came in at $510.5 million at the end of 2018 compared with $473.7 million at 2017-end.
During fourth-quarter 2018, the company repurchased 5.1 million shares of common stock for approximately $113 million. Moreover, for the full year of 2018, it bought back 8.6 million shares for nearly $212 million.
Full-Year 2018 Review
For the full year of 2018, adjusted earnings per share of $2.75 increased 18.5% year over year. Also, revenues increased 3.4% from the prior-year level to $2,733.9 million. However, adjusted EBITDA margin declined 150 bps to 23.3%.
The company expects capital expenditure for 2019 in the range of $150-$180 million. It expects long-term growth at the lower end of the guided range of 12-14%, owing to flat housing starts.
Louisiana-Pacific reaffirms its long-term SmartSide Strand revenue growth target of 12-14%. The company expects EBITDA to grow $75 million by 2021, aided by operational improvement initiatives, supply-chain optimization and transition of management structure. Of the EBITDA growth, $40 million is anticipated from sustainable development in overall equipment effectiveness in its Siding and OSB mills, nearly $25 million from supply-chain optimization and $10 million from investment in line management and infrastructure optimization.
Markedly, the company has authorized $600 million shares under a new share repurchase program.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -23.86% due to these changes.
Currently, Louisiana-Pacific has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Louisiana-Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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