Why Did This Analyst Just Upgrade Boise Cascade After An 'Ugly' Quarter?

BMO Capital Markets’ Mark Wilde upgraded the rating for Boise Cascade Co BCC from Market Perform to Outperform, while reducing the price target from $35 to $23. He mentioned that there is value at the current levels.

On February 17, 2015, Boise Cascade’s shares had peaked at $42.96. A year later, the shares are trading at $13.89, having lost 68 percent. Eroding plywood fundamentals have exerted pressure on the company’s shares, analyst Mark Wilde noted.

Offshore imports, primarily from Brazil, surged by 59 percent in 2015. Prices have declined, with Boise Cascade’s 4Q prices at $67/msf, representing a decline of about 20 percent from the 3Q14 peak. Domestic supply is expected to increase 360K/msf in 2Q, up about 3 percent.

“However, at current levels, we think BCC is priced for a virtual "nuclear winter." While we remain cautious, we think plywood pricing is near a bottom and believe the stock offers great value for patient investors,” Wilde wrote.

“With costs for some producers nearing cash, we think supply cuts are inevitable -- tightening the market,” the analyst commented, while adding that Boise Cascade’s valuation appears attractive even with highly conservative assumptions.

The BMO Capital Markets report mentioned that Boise Cascade was among “the best-run building products companies in our coverage.”