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Louisiana-Pacific (LPX) Q1 Earnings & Revenues Lag, Down Y/Y

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Louisiana-Pacific Corporation (LPX - Free Report) reported first-quarter 2019 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Also, both the top and bottom lines deceased on a year-over-year basis due to increased macro environment headwinds.

The company reported adjusted earnings of 13 cents per share, missing the consensus mark of 16 cents by 18.8%. The reported earnings declined 79.4% from the year-ago figure of 63 cents. The downside can be attributed to macro environment headwinds, and higher cost and expenses.

Louisiana-Pacific’s net sales came in at $582 million, which lagged analysts’ expectation of $593.6 million by 2%. The said figure decreased 15.8% from $691.3 million on a year-over-year basis. Lower OSB prices and softness in EWP sales negatively impacted the company’s top-line performance.

Louisiana-Pacific Corporation Price, Consensus and EPS Surprise

Operating Highlights

Gross profit during the quarter was $81 million, declining 54.2% year over year. Selling, general and administrative expenses, as a percentage of revenues, increased 241 basis points (bps) to 9.79% from a year ago.

Adjusted EBITDA from continuing operations totaled $58 million in the quarter, down 63.5% from $159 million recorded in the prior-year period. Adjusted EBITDA margin also contracted 1300 bps to 10% from 23% in the year-ago quarter.

Segmental Analysis

Siding: The segment’s sales came in at $236 million, 4% higher than the prior-year figure of $227 million. However, adjusted EBITDA of $42 million decreased 6.7% from the year-ago period. Particularly in the LP SmartSide Trim & Siding business, revenues improved 13% from the prior-year level during the quarter.

Oriented Strand Board or OSB: Sales at the OSB segment deteriorated 33.5% year over year to $208 million. Moreover, adjusted EBITDA during the reported quarter fell significantly to $8 million from $105 million in the year-ago period due to reduced selling prices. Notably, volume of Structural Solutions (value-added OSB) increased to 40% of total OSB sold. However, overall OSB price realization dropped 29% year over year.

Engineered Wood Products (EWP): EWP sales declined 14.2% year over year to $90 million in the quarter. However, adjusted EBITDA improved 40% from the prior-year quarter to $7 million.

South America: The segment’s sales grew 7.1% year over year to $45 million. However, adjusted EBITDA of $10 million fell 9.1% from the year-ago quarter.

Financials

As of Mar 31, 2019, Louisiana-Pacific had cash and cash equivalents of $361 million compared with $878 million at the end of 2018. Long-term debt (excluding current portion) was in line with the 2018-end level of $347 million.

Net cash used for operations totaled $54 million at the end of the first quarter compared with net cash provided by operations of $31 million in the comparable period of 2018.

During the reported quarter, the company initiated $400-million accelerated share repurchase program and repurchased the remaining $38 million from its earlier $250-million stock repurchase authorization.

2019 View

Based on current plans and expectations, as well as certain costs that are likely to impact results, Louisiana-Pacific reiterated its full-year 2019 guidance. The company expects capital expenditure for 2019 in the range of $150-$180 million. It expects long-term growth at the lower end of the guided range of 12-14%, owing to flat housing starts.

Strategic Update

Louisiana-Pacific reaffirms its long-term SmartSide Strand revenue growth target of 12-14%, backed by continued growth opportunities in the business. The company expects EBITDA to grow $75 million within 2021, aided by operational improvement initiatives, supply-chain optimization and transition of management structure.

Of the EBITDA growth, $40 million is anticipated from sustainable development in overall equipment effectiveness (OEE) in Siding and OSB mills, nearly $25 million from supply-chain optimization, and $10 million from its investment in line management and infrastructure optimization.

Zacks Rank & Other Peer Releases

Currently, Louisiana-Pacific holds a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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