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Louisiana-Pacific (LPX) Q2 Earnings Miss Estimates, Down Y/Y

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Louisiana-Pacific Corporation (LPX - Free Report) reported lower-than-expected results in second-quarter 2019. Both the top and bottom lines not only missed the Zacks Consensus Estimate but also deceased on a year-over-year basis due to lower OSB pricing across North American operations and weak macro environment. Notably, the stock declined more than 7% in the pre-market trading session post the earnings release, as the company reduced its revenue guidance.

Adjusted earnings of 11 cents per share lagged the consensus mark of 25 cents by 56%. The reported earnings declined 52.2% from the year-ago figure of 23 cents. The downside can be attributed to macro environment headwinds, and higher costs and expenses.

The company reported net sales of $588 million, missing the consensus mark of $642 million by 8.4%. The top line also fell 27.5% from $811 million reported a year ago. Lower OSB prices negatively impacted its performance.

 

Louisiana-Pacific Corporation Price, Consensus and EPS Surprise

 

Meanwhile, Louisiana-Pacific announced quarterly cash dividend of 13.5 cents per share, which will be paid on Sep 3 to its shareholders of record on Aug 19, 2019.

Segmental Analysis

Siding: Sales in the segment came in at $238 million, down 9.2% from the prior-year figure of $262 million. Adjusted EBITDA also decreased 27% from the year-ago period to $46 million. The decline was mainly due to decrease in sales prices of OSB sold.

Oriented Strand Board or OSB: Sales at the OSB segment deteriorated 48.6% year over year to $199 million. Notably, the company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was negative $3 million versus adjusted EBITDA of $163 million in the year-ago period. Decrease in selling price negatively impacted its overall results.

Engineered Wood Products (EWP): EWP’s sales fell 5.3% year over year to $107 million in the quarter. Meanwhile, adjusted EBITDA declined 9% from the prior-year quarter to $10 million.

South America: The segment’s sales also dropped 11.1% year over year to $40 million. Also, adjusted EBITDA of $9 million fell 25% from the year-ago quarter.

Operating Highlights

Gross profit during the quarter was $78 million, declining 70.1% year over year. Selling, general and administrative expenses, as a percentage of revenues, increased 370 basis points (bps) from a year ago to 9.9%.

Adjusted EBITDA from continuing operations was $53 million in the quarter, down 78.1% from $242 million recorded in the prior-year period. Adjusted EBITDA margin also contracted 2080 bps to 9% from 29.8% in the year-ago quarter.

Financials

As of Jun 30, 2019, Louisiana-Pacific had cash and cash equivalents of $348 million compared with $878 million at the end of 2018. Long-term debt (excluding current portion) of $348 million was slightly above the 2018-end level of $347 million.

At the end of the second quarter, net cash provided by operations was $54 million compared with $237 million in the comparable period of 2018.

2019 View & Strategic Update

Based on current plans and expectations, as well as certain costs that are likely to impact results, Louisiana-Pacific tweaked its full-year 2019 guidance.

The company’s 2019 capital expenditure is projected within $160-$170 million versus $150-$180 million expected earlier.

Given slower housing starts, Louisiana-Pacific reduced SmartSide Strand revenue growth target to 10% in 2019 and 10-12% in the long term compared with 12-14% expected earlier.

The company expects EBITDA to grow $75 million within 2021, aided by overall equipment effectiveness (OEE) and supply chain optimization of $17 million in the first half of 2019. Of the EBITDA growth, $40 million is anticipated to be generated from sustainable development in OEE in Siding and OSB mills, nearly $25 million from supply-chain optimization, and $10 million from investment in line management and infrastructure optimization.

Zacks Rank & Peer Releases

Louisiana-Pacific, which shares space with Norbord Inc. (OSB - Free Report) in the Zacks Building Products - Wood industry, currently carries a Zacks Rank #4 (Sell).

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

Universal Forest Products, Inc. (UFPI - Free Report) reported better-than-expected earnings in the second quarter of 2019. The company’s earnings of 88 cents per share topped the consensus estimate of 83 cents by 6% and increased 23.9% from 71 cents reported in the year-ago period. However, net sales of $1.24 billion declined 4% on a year-over-year basis. Lower lumber prices and a 9% reduction in selling prices significantly impacted its gross sales.

Weyerhaeuser Company (WY - Free Report) reported mixed second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate by 60%, while net sales missed the same by 2.1%. On a year-over-year basis, both the top and bottom lines declined due to lower segmental net sales, volatility in various markets served and weather-related challenges.
 
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