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Why Is Louisiana-Pacific (LPX) Up 7.1% 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 added about 7.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Louisiana-Pacific due for a pullback? 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 drivers.

Louisiana-Pacific Q4 Earnings & Sales Top, Margin Falls

Louisiana-Pacific Corporation — 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.

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 & 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 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%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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