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Why Is Louisiana-Pacific (LPX) Down 6.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Louisiana-Pacific (LPX - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Louisiana-Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Louisiana-Pacific (LPX - Free Report) Beats Q1 Earnings & Revenue Estimates

Louisiana-Pacific Corporation — commonly known as LP —reported first quarter 2021 results, wherein both the top and bottom lines handily surpassed the Zacks Consensus Estimate as well as gained impressively on a year-over-year basis. The uptrend was mainly attributable to growth in SmartSide and higher Oriented Strand Board prices. Operational efficiency and cost-containment efforts also supported the growth.

LP Chairman and CEO, Brad Southern, said "LP's operations, procurement, and logistics teams overcame supply chain challenges as well as extreme winter weather in the southeast to deliver outstanding results. Capacity expansion projects are underway at Houlton and Peace Valley in order to meet strong and growing demand for innovative SmartSide and Structural Solutions products."

Detailed Discussion

Louisiana-Pacific reported first-quarter adjusted earnings of $3.01 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 9.1% and increased almost 8.9 times from the year-ago reported figure of 34 cents.

Net sales of $1.02 billion topped the consensus estimate of $931 million by 9.2% and improved a whopping 74% from the year-ago period. The upside was driven by 49% LP SmartSide sales growth and a $319-million increase in OSB net sales. OSB prices also increased $333 million from the prior-year quarter, partially offset by 7% lower OSB sales volume. The company also witnessed higher freight costs.

Single-family housing starts increased 20.8% year over year. Multi-family starts, however, fell 6.2% from the prior year.

Segmental Analysis

Siding: The segment’s sales of $285 million were up 35% from the prior-year period. The upside was due to an increase in SmartSide volume (39%) and pricing (7%), partially offset by a decrease in fiber sales. Adjusted EBITDA improved 116% from the prior-year quarter to $461 million.

OSB: Sales in the segment increased 145% year over year to $204 million. The company’s adjusted EBITDA also jumped significantly to 909% from a year ago. Increased OSB prices were partially offset by lower volumes owing to supply disruptions and weather-related shutdowns.

EWP: Segment’s sales grew 24% year over year to $123 million. Adjusted EBITDA, however, decreased 13% year over year to $7 million. Increased pricing in response to rising input costs led the top-line growth. However, the net impact of the same reduced adjusted EBITDA by $2 million from the year-ago quarter.

South America: Sales of $53 million rose 47% and adjusted EBITDA grew 175% from the year-ago quarter due to higher OSB as well as siding pricing.

Operating Highlights

Gross margin expanded 2,860 basis points (bps) year over year to 47.1%. Selling, general and administrative expenses — as a percentage of revenues — contracted 470 bps.

Adjusted EBITDA of $461 million was up a notable 455.4% from the prior-year figure of $83 million.

Financials

As of Mar 31, 2021, Louisiana-Pacific had cash and cash equivalents of $645 million compared with $535 million at 2020-end. Long-term debt was $346 million, down from $348 million at 2020-end.

For the first quarter, net cash provided by operations was $314 million, significantly up from $9 million net cash used in operations reported in the year-ago period.

Q2 Guidance

For second-quarter 2021, the company expects SmartSide sales to be more than 30% from the year-ago quarter. OSB sales are expected to sequentially rise more than 30%.

The company anticipates adjusted EDITDA of more than $580 million.

2021 View

Given the current scenario, Louisiana-Pacific now expects capital expenditures for 2021 in the range of $230-$250 million ($220-$230 million expected earlier).

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 68.03% due to these changes.

VGM Scores

At this time, Louisiana-Pacific has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Louisiana-Pacific has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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