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Louisiana-Pacific (LPX) Up on Q3 Earnings & Revenue Beat

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Louisiana-Pacific Corporation (LPX - Free Report) reported impressive results for third-quarter 2020, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. The upside was backed by strong SmartSide strand revenues, increase in OSB pricing and favorable resin costs. Operational efficiency and cost-containment efforts also supported its performance. Shares of the company gained 7% on Nov 3, post the earnings release.

Detailed Discussion

Louisiana-Pacific reported third-quarter adjusted earnings of $1.56 per share, which beat the Zacks Consensus Estimate of $1.49 by 4.7%. The metric also increased significantly from the year-ago reported figure of 8 cents per share.

Net sales of $795 million topped the consensus estimate of $773 million by 2.9% and increased 31.8% from the year-ago period. The upside was driven by 22% SmartSide revenue growth and $179 million increase in Oriented Strand Board or OSB prices, partly offset by 5% lower sales volume. Notably, revenues for LP South America increased $9 million from the prior-year quarter due to 33% higher sales volume.

Segmental Analysis

Siding: The segment’s sales of $268 million were up 10% from the prior-year period. The upside was due to a 22% increase in SmartSide revenues owing to 19% higher volume and 3% increase in prices.

Adjusted EBITDA margin improved 1000% basis points (bps) from the prior-year quarter to 28%. The upside was backed by higher SmartSide revenues, increased production at the Dawson Creek facility and lower raw material costs, partially offset by a decrease in fiber sales.

OSB: Sales in the segment increased 87% year over year to $368 million. The company’s adjusted EBITDA margin also jumped significantly to 51% from negative 1% reported a year ago. Increased OSB prices and lower raw material costs for the quarter bode well.

Engineered Wood Products or EWP: Segment’s sales declined 2% year over year to $103 million. Adjusted EBITDA margin expanded to 9% from 5% a year ago.

South America: Sales of $45 million increased 25% and adjusted EBITDA margin of 24% expanded 400 bps from the year-ago quarter. Higher OSB and Siding volumes (local and export) were partially offset by increased imported resin costs and unfavorable foreign currency fluctuations.

Operating Highlights

Adjusted EBITDA of $273 million was up 457% from the prior-year figure of $49 million due to increased OSB prices and SmartSide sales.

Financials

As of Sep 30, 2020, Louisiana-Pacific had cash and cash equivalents of $420 million compared with $181 million at 2019-end. The company, which paid dividends of $49 million and $29 million for share repurchases, ended the quarter with nearly $1 billion of liquidity.

Long-term debt was $348 million, flat with 2019-end. For the third quarter, net cash provided by operations was $218 million, significantly up from $59 million reported in the year-ago period.

Zacks Rank & Peer Releases

Louisiana-Pacific, which shares space with Norbord Inc. in the Zacks Building Products - Wood industry, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UFP Industries, Inc.’s (UFPI - Free Report) third-quarter 2020 earnings and revenues not only surpassed the Zacks Consensus Estimate but also improved on a year-over-year basis.

Weyerhaeuser Company (WY - Free Report) reported third-quarter 2020 results, wherein earnings comfortably surpassed the Zacks Consensus Estimate but revenues missed the same.

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