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5 Reasons You Should Buy Louisiana-Pacific (LPX) Stock Now

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Picking stocks from the vast galaxy of investments is a tall order, especially given the recent developments in the U.S. economy. Despite concerns related to a probable rate hike at the March Fed meeting, adding construction stock Louisiana-Pacific Corporation (LPX - Free Report) to your portfolio should be prudent.

The $3.45-billion company manufactures building materials and engineered wood products in the U.S., Canada, Chile and Brazil and has strengths in several key areas. Louisiana-Pacific is the world’s largest producer of Oriented Strand Board or OSB and a leading manufacturer of engineered wood in North America.

What’s Working in Favor of the Stock?

Stock Price Movement: Louisiana-Pacific’s shares advanced 45.5% in the last one year, outperforming the Zacks categorized Building Products - Wood industry’s growth of 20.8%. Going forward, compelling 2017 outlook for the U.S. homebuilding industry given affordable interest rates, tight inventory, an improving economy, modest wage growth, low unemployment levels and positive consumer confidence, should drive the stock’s performance in the upcoming quarters.



Estimate Revisions: In the last 60 days, the Zacks Consensus Estimate for Louisiana-Pacific increased 12.6% to $1.52 per share for 2017. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #1 (Strong Buy) for the stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, Louisiana-Pacific beat earnings estimates in three of the last four quarters, the average being 66.28%.

Earnings & Revenue Growth: Louisiana-Pacific’s earnings are expected to register 71.4% growth in 2017 on 13.2% higher revenue.

The year 2016 marked the company’s first year of positive operating earnings since 2013 when North Central Oriented Strand Board or OSB prices averaged $381 in the first half of 2016. The impressive results were buoyed by higher OSB prices, along with 36% growth in Siding segment EBITDA where Louisiana-Pacific is gradually gaining traction.

For 2017, the company expects demand for housing to increase, driven primarily by higher household formations and wage growth.

Solid ROE: Louisiana-Pacific’s trailing 12-month Return on Equity (ROE) ratio is 11.56% compared with the industry average of 7.71%. This indicates that the company reinvests more efficiently as compared to its peer group.

Solid VGM Score: The company flaunts an impressive VGM Score of “B”. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 (Buy) make solid investment choices.

Other Key Picks

Apart from Louisiana-Pacific, investors may consider stocks in the construction sector like NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) and D.R. Horton, Inc. (DHI - Free Report) .

Full-year 2017 earnings for NVR and PulteGroup are expected to increase 23.6% and 32.1%, respectively. Both the stocks sport a Zacks Rank #1.

D.R. Horton is expected to witness 15.8% growth in 2017 earnings. The stock holds a Zacks Rank #2.

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