Market Overview

After Louisiana-Pacific's Wild Week, What Are Investors To Do With Building Products?

After Louisiana-Pacific's Wild Week, What Are Investors To Do With Building Products?
Related LPX
Benzinga's Top Downgrades
Top Performing Industries For November 28, 2016

Last Friday, December 5, research firm DA Davidson downgraded Louisiana-Pacific Corporation (NYSE: LPX) from a “Buy” to a “Neutral” rating.

A few days earlier, RBC Capital had done the same, changing its rating from a “Sector Perform” to an “Underperform,” setting a price target of $13.00 per share. That implies a downside potential of 22 percent from the current stock price of $16.85 per share (as of December 8).

The downgrades, and the stock’s general performance this year (down more than 9 percent year-to-date, after 3 years of great returns), have triggered an increasing short interest in the company. The current short interest ratio stands around 2.47 days.

Related Link: How These 4 Tech Giants Are Resolving Their China Challenges

Despite the news, Louisiana-Pacific was up 8.58 percent on Monday, as Norbord's $667 million deal to buy Ainsworth Lumber could paint an encouraging picture for the industry’s future.

The Industry

As private (residential and non-residential) and public spending on construction continues to recuperate, the building materials industry seems poised to grow.

According to a report by Moody's Investors Services, the ascending volumes –- and the leverage that comes with them -- coupled with higher prices, should drive operating income up by more than 7 percent over the next 12 to 18 months.

Competitors And Peers

Weyerhaeuser Co (NYSE: WY), another forest products company with a much larger market capitalization than Louisiana-Pacific, has returned about 14.3 percent year-to-date, and currently trades around $36.11 per share.

Still, analysts expect it to continue to climb up to $39.00-$40.00 per share.

Another industry peer, Boise Cascade Co (NYSE: BCC), which has a market cap very close to Louisiana-Pacific, is also up, by 23.2 percent year-to-date.

Image credit: Juhan Sonin, Flickr

Posted-In: DA Davidson RBC CapitalLong Ideas Trading Ideas Best of Benzinga


Related Articles (LPX + BCC)

View Comments and Join the Discussion!