DA Davidson: Louisiana-Pacific 'Compelling' Despite Pricing Headwinds

Despite cost headwinds from rising oriented strand board prices, Louisiana-Pacific Corp LPX remains a “compelling value," according to D.A. Davidson.&

The Analyst

D.A. Davidson’s Steven Chercover upgraded Louisiana-Pacific shares from Neutral to Buy and lifted the stock’s price target from $33 to $36.

The Thesis

OSB prices could be nearing a peak as a result of shipping difficulties and slow mill start-ups, presenting a risk heading into the “heart of building season," Chercover said in a May 8 note. (See the analyst's track record here.) 

OSB pricing headwinds could be offset by strength elsewhere, the analyst said.

“Domestic OSB prices remain the biggest source of risk to estimates, but siding, South America and even [engineered wood products] are providing increasing ballast for the enterprise.”

The company should also see improved second-quarter comps as inventories flow through the system and order patterns become normalized, Chercover said. 

The company’s $45-million investment in construction company Entekra offers an “interesting” opportunity but little overlap, the analyst said. 

Price Action

Louisiana-Pacific Corp. shares were down 2.29 percent at the close Wednesday at $26.93; The stock closed the week at $27.76.

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