Louisiana-Pacific Slips to Strong Sell - Analyst Blog

On Mar 26, Zacks Investment Research downgraded Louisiana-Pacific Corporation LPX to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Estimates have been moving downwards ever since Louisiana-Pacific reported disappointing fourth quarter 2013 results on Feb 13. Adjusted loss per share of 5 cents per share missed the Zacks Consensus Estimate of earnings of 5 cents by a wide margin. The quarterly loss was also a massive drop from the year-ago quarter's earnings of 18 cents.

Despite decent revenues, the bottom line underperformed due to a massive $2 million loss from foreign exchange, lower pricing in Oriental Strand Board (OSB) segment and lower earnings before interest, taxes, depreciation and amortization (EBITDA). Adjusted EBITDA from continuing operations declined 66.2% from the prior-year quarter owing to a rise in operating costs and a decline in OSB segment EBITDA due to lower prices.  

The Oriental Strand Board (OSB) segment has been witnessing soft pricing for the past two quarters. Sales in the OSB segment decreased 5% year over year in the fourth quarter due to a 20% decline in pricing, despite a 17% increase in volume. The segment's adjusted EBITDA also declined 66.2% year over year attributable to lower pricing.

However, Louisiana-Pacific is optimistic about 2014, on the back of improving housing market. The company intends to accelerate its penetration in the major markets in the upcoming quarters.

Other Stocks to Consider

Better-ranked stocks in the sector include Universal Forest Products Inc. UFPI and Potlatch Corp. PCH with a Zacks Rank #1 (Strong Buy) and Weyerhaeuser Co. WY with a Zacks Rank #2 (Buy).