Monday, March 19, 2018

Louisiana-Pacific Making The Best Of The Cycle

When I last wrote about Louisiana-Pacific (NYSE:LPX) (or “LP”) back in October of 2016, I thought the shares still had upside on the basis of ongoing price/margin leverage in OSB, continued growth in housing, and the growth of the company’s siding business. The shares are up about 50% since then, outperforming most of its peers like Norbord (NYSE:OSB), James Hardie (NYSE:JHX), and Weyerhauser (NYSE:WY) over that time (Ply Gem (NYSE:PGEM) has nearly matched LP, while Boise Cascade (NYSE:BCC) has outperformed), as OSB pricing has exceeded expectations on uncommonly responsible competitor behavior and as the company has executed well on its operating improvements and siding growth plans.

It’s harder to see as much upside now. While OSB pricing has held up, and likely will remain above $300 despite oncoming capacity growth, and siding continues to have strong growth potential, I believe a lot of that is in the share price. I don’t think LP shares are overvalued on the basis of cycle-average EBITDA, but I do believe that 2018 could be the near-term peak and the returns could look more “market-like” from this point.

Follow this link to the full article:
Louisiana-Pacific Making The Best Of The Cycle

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