Back in February, I thought Louisiana-Pacific (NYSE:LPX) had upside into the high teens on improving housing numbers and stronger OSB pricing, and the shares are up close to 25% (to just under $19) since then as housing has been healthy and OSB prices have improved. Better still, the industry has remained responsible and restrained with respect to capacity, raising the possibility of even better pricing in the next year or two.
Lousiana-Pacific is closing its profitability gap with Norbord (NYSE:OSB) and Weyerhaeuser (NYSE:WY) in OSB, but also looking to expand its siding business as SmartSide continues to gain share in the market. It's important to remember that this is a cyclical stock (currently in the good part of its cycle), though, and that these good times won't last forever. There's still some upside to fair value based upon a full-cycle EBITDA estimate (and the possibility that more restrained competition will support a higher full-cycle number), but more of the upside in the shares now rests on the Street getting fired up about the housing/building material cycle and indulging in magical "it's different this time" thinking.
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Louisiana-Pacific Riding The Rising Tide