A month has gone by since the last earnings report for Louisiana-Pacific (
LPX Quick Quote LPX - Free Report) . Shares have lost about 11.7% 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 drivers.
Louisiana-Pacific Q1 Earnings & Sales Top Estimates
Louisiana-Pacific Corporation — commonly known as LP — reported robust results for first-quarter 2022. The top and the bottom line surpassed their respective Zacks Consensus Estimate and increased on a year-over-year basis.
LP chairman and CEO Brad Southern, stated, "Siding Solutions sales grew at 17% to set a quarterly record while achieving a 25% EBITDA margin despite inflationary headwinds and simultaneous capacity expansion projects. LP SmartSide siding production began on time at our Houlton, Maine facility. Higher prices for OSB and EWP helped LP achieve its second-highest quarter for adjusted EBITDA, and our ongoing share repurchases resulted in a record quarterly adjusted earnings per share." Detailed Discussion
Louisiana-Pacific’s adjusted earnings came in at $5.08 per share, surpassing the Zacks Consensus Estimate of $4.54 by 11.9%. The bottom line increased 68.8% from the year-ago reported figure of $3.01 per share.
Net sales of $1.34 billion topped the consensus estimate of $1.21 billion by almost 11% and improved 31% from the year-ago period. The upside was driven by solid segmental results. Single-family housing starts increased 3.5% year over year and multi-family starts rose 22.6%. Segmental Analysis
Siding: The segment’s sales of $332 million were up 16.5% from the prior-year period. A 17% increase in Siding Solutions (formerly known as SmartSide) revenues, backed by a 12% rise in average net selling price and a volume increase of 4% from the prior-year quarter’s levels, led to the upside. Higher sales of innovative products drove the results. Adjusted EBITDA fell 7.8% from the prior-year quarter to $83 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 38% year over year to $744 million, backed by 12% increased volume and 23% higher OSB prices. The company’s adjusted EBITDA ralllied 42.7% year over year to $505 million, driven by higher prices and sales volumes (primarily Structural Solutions) along with increased raw material costs. EWP: Segment’s sales rose 38% year over year to $170 million, backed by price increases in response to significantly higher input costs, partially offset by the discontinuation of LSL production. Adjusted EBITDA increased significantly to $38 million from just $7 million a year ago. Increased pricing in response to the rising input costs contributed to the top and the bottom line. South America: Sales of $63 million rose 26.4% and adjusted EBITDA grew 19% from the year-ago quarter to $25 million due to higher OSB and siding pricing. Operating Highlights
The gross margin contracted 350 basis points year over year to 49.4%. Adjusted EBITDA of $636 million was up 37.7% from the prior year’s figure of $461 million.
As of Mar 31, 2022, Louisiana-Pacific had cash and cash equivalents of $624 million compared with $358 million at the 2021-end. Long-term debt was in line with the 2021-level of $346 million.
For the first quarter, net cash provided by operations was $425 million, up from $314 million reported in the year-ago period. Guidance
For second-quarter 2022, the company expects Siding Solutions revenue growth to be more than 20% from the year-ago period. OSB revenues are expected to be sequentially low by 7% (based on Random Lengths’ report published on Apr 29, 2022). It anticipates consolidated adjusted EBITDA of more than $540 million.
For 2022, Louisiana-Pacific now expects Siding Solutions revenue growth of more than 20%. Also, the company projects capital expenditures for 2022 to be $400-$430 million, indicating an increase from $254 million in 2021. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 19.7% due to these changes.
At this time, Louisiana-Pacific has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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.
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.