We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Louisiana-Pacific (LPX) Up 95% in a Year: Housing Holds Key
Read MoreHide Full Article
Louisiana-Pacific Corporation (LPX - Free Report) or LP’s shares have surged 95% in the past year compared with the Zacks Building Products – Wood industry’s 52.7% rally. The company has been banking on solid U.S. residential market and repair and remodeling (R&R) business. Also, strength in Siding business, rising Oriented Strand Board or OSB prices, solid business transformation plan and operational efficiency bode well.
The company posted impressive third-quarter 2021 results. Both the top and the bottom line surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The upside was backed by favorable OSB prices and an improving housing market backdrop.
Earnings estimates for the fourth quarter and 2021 have moved up 7.5% and 1.6%, respectively, in the past 30 days. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in the trailing seven quarters. This trend reflects bullish analyst sentiments. Its impressive VGM Score of A, supported by Value and Growth Score of A, is a testimony to the fact.
Image Source: Zacks Investment Research
Yet, increase in raw material prices, freight and labor costs along with higher expenses associated with repair and remodeling activity and product introduction are a concern.
LP is focused on improving the siding unit to increase the penetration of siding products in R&R activities. In the past several quarters, LP has been experiencing solid demand for its products. In the first nine months of 2021, the Siding unit delivered 27% revenue growth, backed by a 34% year-over-year rise in Siding Solutions business. The upside can be attributed to robust demand for its products. It intends to continue increasing the investment in selling and marketing of the said business in 2021 and beyond.
LP is gradually transforming from a commodity producer to a more stable cash-generative business by increasing revenues and EBITDA mix. It has been mainly focusing on three areas — increasing the efficiency of mills by improving productivity, run time and quality through overall equipment effectiveness or OEE initiatives; applying best practices to the supply chain; and optimizing infrastructure costs. Since January 2019 till 2020, LP achieved $178 million in cumulative EBITDA from growth and efficiency. During the first nine months of 2021, adjusted EBITDA increased $1.2 billion to $1.7 billion, primarily due to growth in Siding Solutions revenues and higher OSB prices.
LP’s business banks on acquisitions, business combinations and divesture of low-profitable businesses. Recently, the company confirmed capacity expansion projects at Houlton and restarting of the Peace Valley mill. It expects to start SmartSide production at Houlton in late first-quarter 2022. Meanwhile, the company continues to accelerate the Sagola conversion and intends to start SmartSide production therein in first-quarter 2023.
Meanwhile, resilient housing markets prospects have been driving the demand for residential construction and thereby wood products.
Factors Denting Profitability
Higher costs and expenses have been a concern for all wood industry players. The cost of different varieties of wood fiber is subject to volatility owing to governmental, economic or industry conditions. In the last three quarters of 2021, the company witnessed higher freight and transport costs along with rising input costs. In the third quarter, Siding’s adjusted EBITDA fell 4% from the prior-year period’s levels, due to higher costs for raw materials, freight, maintenance and higher investments in sales and marketing.
Along with wood fiber and lumber, shortages of resin and adhesives along with supply chain challenges are likely to persist. Also, increased marketing investments associated with accelerating repair and remodel channel penetration along with new product introductions have been putting pressure on its performance over the last few quarters.
Some Better-Ranked Stocks in Construction Sector
Comfort Systems USA, Inc. (FIX - Free Report) : This heating, ventilation, and air conditioning installation service provider presently sports a Zacks Rank #1.
Comfort Systems has a trailing four-quarter earnings surprise of 17.4%, on average. The Zacks Consensus Estimate for earnings per share for the current year has improved 7.1% in the past 30 days. Shares of FIX have jumped 108.9% in the past year.
Meritage Homes Corporation (MTH - Free Report) — a leading homebuilder of single-family homes — sports a Zacks Rank #1 at present.
Meritage Homes has a trailing four-quarter earnings surprise of 24.4%, on average. The Zacks Consensus Estimate for earnings for the current year indicates a 74.6% year-over-year surge. Shares of MTH have jumped 30.7% in the past year.
Beazer Homes USA, Inc. (BZH - Free Report) , a national homebuilder, currently sports a Zacks Rank #1.
Beazer Homes has a trailing four-quarter earnings surprise of 60.3%, on average. The Zacks Consensus Estimate for its earnings per share for the current year has improved 44% in the past seven days. Shares of BZH have jumped 60.3% in the past year.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Louisiana-Pacific (LPX) Up 95% in a Year: Housing Holds Key
Louisiana-Pacific Corporation (LPX - Free Report) or LP’s shares have surged 95% in the past year compared with the Zacks Building Products – Wood industry’s 52.7% rally. The company has been banking on solid U.S. residential market and repair and remodeling (R&R) business. Also, strength in Siding business, rising Oriented Strand Board or OSB prices, solid business transformation plan and operational efficiency bode well.
The company posted impressive third-quarter 2021 results. Both the top and the bottom line surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The upside was backed by favorable OSB prices and an improving housing market backdrop.
Earnings estimates for the fourth quarter and 2021 have moved up 7.5% and 1.6%, respectively, in the past 30 days. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in the trailing seven quarters. This trend reflects bullish analyst sentiments. Its impressive VGM Score of A, supported by Value and Growth Score of A, is a testimony to the fact.
Yet, increase in raw material prices, freight and labor costs along with higher expenses associated with repair and remodeling activity and product introduction are a concern.
Let’s delve deeper into the factors influencing the performance of LP — a Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Strategies to Drive Growth
LP is focused on improving the siding unit to increase the penetration of siding products in R&R activities. In the past several quarters, LP has been experiencing solid demand for its products. In the first nine months of 2021, the Siding unit delivered 27% revenue growth, backed by a 34% year-over-year rise in Siding Solutions business. The upside can be attributed to robust demand for its products. It intends to continue increasing the investment in selling and marketing of the said business in 2021 and beyond.
LP is gradually transforming from a commodity producer to a more stable cash-generative business by increasing revenues and EBITDA mix. It has been mainly focusing on three areas — increasing the efficiency of mills by improving productivity, run time and quality through overall equipment effectiveness or OEE initiatives; applying best practices to the supply chain; and optimizing infrastructure costs. Since January 2019 till 2020, LP achieved $178 million in cumulative EBITDA from growth and efficiency. During the first nine months of 2021, adjusted EBITDA increased $1.2 billion to $1.7 billion, primarily due to growth in Siding Solutions revenues and higher OSB prices.
LP’s business banks on acquisitions, business combinations and divesture of low-profitable businesses. Recently, the company confirmed capacity expansion projects at Houlton and restarting of the Peace Valley mill. It expects to start SmartSide production at Houlton in late first-quarter 2022. Meanwhile, the company continues to accelerate the Sagola conversion and intends to start SmartSide production therein in first-quarter 2023.
Meanwhile, resilient housing markets prospects have been driving the demand for residential construction and thereby wood products.
Factors Denting Profitability
Higher costs and expenses have been a concern for all wood industry players. The cost of different varieties of wood fiber is subject to volatility owing to governmental, economic or industry conditions. In the last three quarters of 2021, the company witnessed higher freight and transport costs along with rising input costs. In the third quarter, Siding’s adjusted EBITDA fell 4% from the prior-year period’s levels, due to higher costs for raw materials, freight, maintenance and higher investments in sales and marketing.
Along with wood fiber and lumber, shortages of resin and adhesives along with supply chain challenges are likely to persist. Also, increased marketing investments associated with accelerating repair and remodel channel penetration along with new product introductions have been putting pressure on its performance over the last few quarters.
Some Better-Ranked Stocks in Construction Sector
Comfort Systems USA, Inc. (FIX - Free Report) : This heating, ventilation, and air conditioning installation service provider presently sports a Zacks Rank #1.
Comfort Systems has a trailing four-quarter earnings surprise of 17.4%, on average. The Zacks Consensus Estimate for earnings per share for the current year has improved 7.1% in the past 30 days. Shares of FIX have jumped 108.9% in the past year.
Meritage Homes Corporation (MTH - Free Report) — a leading homebuilder of single-family homes — sports a Zacks Rank #1 at present.
Meritage Homes has a trailing four-quarter earnings surprise of 24.4%, on average. The Zacks Consensus Estimate for earnings for the current year indicates a 74.6% year-over-year surge. Shares of MTH have jumped 30.7% in the past year.
Beazer Homes USA, Inc. (BZH - Free Report) , a national homebuilder, currently sports a Zacks Rank #1.
Beazer Homes has a trailing four-quarter earnings surprise of 60.3%, on average. The Zacks Consensus Estimate for its earnings per share for the current year has improved 44% in the past seven days. Shares of BZH have jumped 60.3% in the past year.