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Louisiana-Pacific (LPX) to Divests LP's East River Facility

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In a bid to remove fiber products from portfolio and focus on LP SmartSide strand siding technology, Louisiana-Pacific Corporation LPX has inked a deal with Maibec to divest LP’s East River facility, located in Nova Scotia, Canada. Following the divestiture, Maibec will also take charge of the assets and brand rights of CanExel — the fiber-based siding product manufactured in the East River facility.

However, terms of the deal were kept under wraps. The deal is expected to occur in the second quarter of 2020.

Executive Vice President & General Manager of Siding Neil Sherman stated, “This strategic decision to remove fiber products from our portfolio allows us to mobilize additional resources, increase focus and commitment for our LP SmartSide strand siding technology, and accelerate growth of LP SmartSide ExpertFinish, our new line of prefinished strand-based siding. The future for SmartSide strand is bright, and we expect great things to come.”

Post the divesture, LP’s Siding business will focus exclusively on meeting high customer demand for its strand-based siding products.

Focus on Siding Business Bodes Well

The company is committed to grow strand Siding revenues in 2020 and beyond. Notably, the Siding unit generated 8% higher revenues during fourth-quarter 2019. The company expects EBITDA margin to be at least 20% in the long term, backed by strength in the Siding segment. Also, it intends to continue investment in selling and marketing of said business in 2020 and beyond. The company expects SmartSide Strand sales growth in the range of 10-12% for 2020.

Price Performance

Coming to price performance, shares of Louisiana-Pacific have rallied 22.9% in the past six months compared with the industry's rise of 6.7%. Notably, the company is benefitting from focus in the Siding segment and simultaneously reducing costs across all businesses. Estimates for 2020 have increased in the past 30 days, which depicts analysts’ optimism regarding growth potential in the future.

Zacks Rank & Other Key Picks

Louisiana-Pacific currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the same space are Boise Cascade Company (BCC - Free Report) , Floor & Decor Holdings, Inc. FND and JELD-WEN Holding, Inc. (JELD - Free Report) . Boise Cascade sports a Zacks Rank #1, while Floor & Decor Holdings and JELD-WEN Holding carry a Zacks rank #2.

Boise Cascade has trailing four-quarter positive earnings surprise of 25.6%, on average. The company’s earnings beat estimates in three of the last four quarters.

JELD-WEN Holding has a three-five year expected earnings per share growth rate of 31.3%.

Floor & Decor Holdings 2020 earnings are expected to surge 22.8%.

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