A month has gone by since the last earnings report for Louisiana-Pacific (
LPX Quick Quote LPX - Free Report) . Shares have lost about 3% 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 Beat Estimates, Fall Y/Y
Louisiana-Pacific Corporation or LP reported mixed results for first-quarter 2023. Although the bottom line surpassed the Zacks Consensus Estimate, it declined significantly from the previous year. Net sales also declined year over year and missed analysts’ expectations.
LP chairman and CEO Brad Southern, stated, " Single-Family housing starts were down nearly 30% in the first quarter. Despite this challenging market, Siding sales were flat to prior year quarter, with price increases offsetting lower volume and the OSB segment delivered positive EBITDA. LP's strategy of growing Siding and operating OSB with flexibility and discipline continues to deliver value.” Detailed Discussion
Louisiana-Pacific reported adjusted earnings of 34 cents per share, beating the Zacks Consensus Estimate of 7 cents by 385.7%. The bottom line however declined a whopping 92.8% from the year-ago quarter’s reported figure of $4.75 per share.
Net sales of $584 million missed the consensus estimate of $634 million by 7.9% and declined 50% from the year-ago period due to 66% lower OSB prices and 26% reduced volume. Also, a decrease in South America segment revenues, mainly owing to lower OSB sales volumes and pricing, hurt results. Single-family housing starts fell to 191 from 267 units reported in the year-ago period. Yet, multi-family starts rose to 129 units from 123 units reported a year ago. Segmental Analysis Siding: The segment’s net sales of $331 million were on par with the prior-year period, better than LP’s assumption of a decline of 5%. Also, Siding Solutions' (formerly known as SmartSide) revenues of $329 million were flat year over year. The result was impacted by a 9% decline in volume, which largely offset the 10% rise in average net selling price from the prior-year level. The average net selling price benefited from list price increases and customer mix shifts. Volume decreased due to a challenging new home construction market and elevated levels of channel inventory compared to the prior period. Adjusted EBITDA decreased 18% to $67 million. Price growth was partially offset by lower volume and raw material, freight and labor inflation of $17 million. OSB: Sales in the segment decreased 75% year over year to $189 million, much worse than management’s projection of a 20% decline sequentially. This was owing to a $470 million decrease in OSB prices, a $51 million decrease in sales volume from production curtailments and a $27 million decrease related to production volume from the conversion of the Sagola mill to Siding production. The adjusted EBITDA fell 99% year over year to $5 million due to lower prices and sales volume and increased raw material and wage inflation of $7 million. South America: Net sales of $55 million declined 17%, majorly due to lower OSB sales volumes and pricing. Adjusted EBITDA fell 53% from the year-ago quarter to $12 million due to the above-mentioned headwinds and higher raw material costs. Operating Highlights
The gross margin contracted to 17.3% from 53.1% reported a year ago. Adjusted EBITDA of $66 million was down 89% from the prior-year quarter’s value of $598 million. During fourth-quarter 2022, the company expected adjusted EBITDA to be approximately $35 million.
At first-quarter 2023-end, LP had approximately $675 million of liquidity. As of Mar 31, 2023, Louisiana-Pacific had cash and cash equivalents of $126 million compared with $369 million at the 2022-end. Long-term debt was $347 million, flat with the 2022-end level.
For the first quarter of 2023, net cash used in operations was $119 million versus net cash provided by operations $425 million reported in the year-ago period. On May 3, 2022, LP's board of directors authorized a share repurchase program under which LP was authorized to repurchase shares of its common stock totaling up to $600 million (the 2022 Share Repurchase Program). As of Mar 31, 2023, it repurchased $400 million worth of its common shares under the 2022 Share Repurchase Program. Q2 Guidance
For second-quarter 2023, the company expects Siding Solutions revenues to decline up to 5% from the year-ago period's reported figure. OSB revenues are expected to be up approximately 20% sequentially (based on OSB prices published by Random Lengths, unchanged from the report published on Apr 28, 2023). It anticipates a consolidated adjusted EBITDA to be more than $80 million.
The company anticipates capital expenditures to range between $330 million and $370 million (excluding the $80 million paid for the Wawa acquisition). The capital expenditure will be for mill conversions ($140 million-$160 million), sustaining maintenance ($120 million-$130 million) and other strategic growth projects ($70 million-$80 million). How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -26.86% due to these changes.
At this time, Louisiana-Pacific has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Louisiana-Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.