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Louisiana-Pacific (LPX) Q4 Earnings & Sales Top, Margin Falls

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Louisiana-Pacific Corporation (LPX - Free Report) — commonly known as LP — reported impressive results for fourth-quarter 2021. Both the top and bottom lines surpassed the Zacks Consensus Estimate and grew on a year-over-year basis.

Following the announcement, shares of the company fell 1.6% in the pre-market trading session on Feb 22. Investor sentiments might have been hurt by tepid margin owing to continued raw material and freight cost inflation.

LP chairman and CEO Brad Southern said, "To meet customer demand for our specialty products and accelerate our strategic transformation, LP plans to invest over $400 million in capital projects in 2022, growing our capacity to produce SmartSide, ExpertFinish, and value-added Structural Solutions products."

Detailed Discussion

Louisiana-Pacific’s adjusted earnings came in at $2.24 per share, surpassing the Zacks Consensus Estimate of $1.86 by 20.4%. The bottom line increased 11.4% from the year-ago reported figure of $2.01 per share.

Net sales of $992 billion topped the consensus estimate of $846 million by 17.3% and improved 15% from the year-ago period. The upside was driven by solid segmental results.

Single-family housing starts decreased 5.4% year over year but multi-family starts improved 37.9%.

Segmental Analysis

Siding: The segment’s sales of $281 million were up 16% from the prior-year period. A 9% increase in Siding Solutions (formerly known as SmartSide) revenues, backed by an 11% average net selling price increase, supported the growth. Siding sales volume decreased 2% from the prior-year quarter due to a major scheduled maintenance project, which also lowered production capacity by 9%. Adjusted EBITDA fell 37.7% from the prior-year quarter to $48 million due to raw material and freight cost inflation and higher investments in capacity expansions, equipment maintenance, and sales and marketing.

OSB: Sales in the segment increased 10% year over year to $470 million backed by increased volume, partially offset by 4% lower OSB prices. The company’s adjusted EBITDA declined 7.2% from a year ago to $231 million due to increased raw material prices and maintenance and Peace Valley restart costs.

EWP: Segment’s sales grew 45% year over year to $157 million. Adjusted EBITDA increased significantly to $27 million from just $2 million a year ago. Increased pricing in response to the rising input costs led to top- and bottom-line growth.

South America: Sales of $63 million rose 26% and adjusted EBITDA grew 69.2% from the year-ago quarter to $22 million due to higher OSB and siding pricing, partially offset by increased imported raw material costs.

Operating Highlights

Gross margin contracted 690 basis points (bps) year over year to 33.9%. Adjusted EBITDA of $305 million was down 7% from the prior-year figure of $328 million.

Financials

As of Dec 31, 2021, Louisiana-Pacific had cash and cash equivalents of $358 million compared with $535 million at 2020-end. Long-term debt was $346 million, down from $348 million at 2020-end.

For the fourth quarter, net cash provided by operations was $201 million, down from $321 million reported in the year-ago period.

2021 Highlights

For the year, net sales amounted to $4.6 billion, up 63% from 2020. Adjusted earnings per share came in at $13.97 compared with $4.31 in the previous year.

Adjusted EBITDA for the year summed $2 billion, up 150% from 2020.

Guidance

For first-quarter 2022, the company expects Siding Solutions revenue growth to be 10% from the year-ago period. OSB revenues are expected to sequentially rise 40%. It anticipates consolidated adjusted EBITDA of more than $500 million, up from $461 million reported a year ago.

Given the current scenario, Louisiana-Pacific expects capital expenditure for 2022 to be $400-$430 million, indicating an increase from $254 million in 2020. Also, the company expects Siding Solutions revenue growth of more than 15%.

Zacks Rank & Recent Releases

Louisiana-Pacific currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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