Solid demand for repair and remodeling (R&R) activity has been driving the Zacks
Building Products – Wood industry, which includes manufacturers of lumber and other wood products. Also, the industry is expected to benefit from robust prospects of the U.S. housing market, as the desire of the vast majority of the population to own a home amid COVID-19 has risen. This has been brightening the wood industry outlook. August housing starts, which reflected a huge demand for forestry products, was 3.9% above the revised July figure and 17.4% higher than August 2020. Further, residential building permits — an indicator of construction activity — soared 6% month over month and 13.5% from a year ago. The latest housing data encourages homebuilders and wood industry players like Universal Forest Products, Inc. ( UFPI Quick Quote UFPI - Free Report) , Trex Company, Inc. ( TREX Quick Quote TREX - Free Report) , Boise Cascade Company ( BCC Quick Quote BCC - Free Report) as well as Masonite International Corporation ( DOOR Quick Quote DOOR - Free Report) . The overall industry is poised to benefit from increased government spending on infrastructure projects, and strong gains in repair and remodeling activity. Image Source: Zacks Investment Research
Based on various parameters, let’s check out whether Boise Cascade or Masonite is more appealing to investors. It is to be noted that both the companies are almost neck to neck in terms of market cap and carry a Zacks Rank #3 (Hold). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Determinants of the Stocks
Boise Cascade — having a market cap of $2.17 billion — is one of the largest producers of engineered wood products or EWP and plywood in North America as well as a leading wholesaler of building products in the United States. Its Wood Products segment manufactures EWP and plywood. The Building Materials Distribution unit is a wholesale distributor of building materials. The company primarily banks on strength in residential construction.
Conversely, Masonite — with a market cap of $2.66 billion — is a leading manufacturer of doors across the world, with a significant market share in both interior and exterior door products. It operates 58 manufacturing and distribution facilities in seven countries. The company holds a significant customer base in the United States, Canada and the United Kingdom. Robust demand in residential end markets and solid execution have been key strengths for Masonite. Prospects & Stock Performance
Despite higher material and labor costs as well as supply chain disruptions over the past several months, the industry has been enjoying solid demand. Depending on the ability to yield higher profits amid headwinds, both the companies are expected to generate greater earnings.
For Boise Cascade, the Zacks Consensus Estimate for 2021 earnings indicates 153.5% year-over-year growth. The same for Masonite’s bottom line suggests an improvement of 37.7% from a year ago. In fact, both Masonite and Boise Cascade have a VGM Score of A. Shares of Boise Cascade have gained 20.5% in the year-to-date period compared with Masonite’s 12.3% growth and the industry’s 20.4% rally in the same period. In terms of earnings growth expectation and price movement, Boise Cascade is a clear winner. Impressively, both of them have a solid VGM score. A Look at Stocks’ Profitability & Valuation
Return on Equity in the trailing 12 months for Boise Cascade is 66.1% compared with Masonite and the industry’s 26.7% and 26.6%, respectively. Markedly, Boise Cascade provides impressive returns to investors than Masonite and the industry.
The trailing 12-month price-to-earnings multiple for Boise Cascade and Masonite is 3.45 and 14.57, respectively, compared with 12.79 for the industry. Masonite’s shares are costlier than Boise Cascade and the industry. Our Take
Boise Cascade certainly has an edge over Masonite in terms of earnings growth expectation, stock performance, return and valuation. Nonetheless, both the companies remain optimistic about overall industry growth trends, given solid demand for residential construction, offsetting supply-side woes.