Louisiana-Pacific (LPX) Q3 Earnings Top, Sales Lag, Up Y/Y

Louisiana-Pacific Corporation (NYSE:LPX) reported mixed third-quarter 2018 results, wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.

The company reported adjusted earnings per share of 83 cents in the quarter, beating the consensus mark of 66 cents by 25.8%. Earnings also improved from the year-ago figure of 70 cents. The upside can be attributed to strong operational execution across the business, coupled with ongoing focus on its value-add, as well as high-margin siding and specialty products. However, headwinds related to oriented strand board (“OSB”) pricing and higher transportation expenses pose a concern.

Net sales of $736.8 million in the quarter lagged the consensus mark of $748 million but grew 3% year over year.

Adjusted EBITDA from continuing operations came in at $193 million in the quarter, down from $194 million in the prior-year quarter.

Segmental Analysis

OSB: Sales at the OSB segment decreased 0.5% year over year to $349 million. Sales volumes in commodity OSB were down 4% in the quarter, while sales volumes in its value-add products were up 8% from a year ago. Meanwhile, pricing for OSB was down 4% year over year in commodity while 3% higher in value-add products. The decrease in OSB pricing impacted operating results by $4 million. In addition to the reduced sales price, the company recorded an increase in raw material costs, primarily resin.

In the quarter, adjusted EBITDA decreased 7.7% from the third quarter of 2017.

Siding Segment: This segment’s sales were up 6.5% to $240.8 million. Within this segment, SmartSide strand average sales prices increased 5% due to changes in the product mix and higher price realization. Meanwhile, sales volumes were up 10%. In SmartSide fiber, sales prices were up 11%, while volumes were down 5%. Additionally, prices of CanExel (representing 6% of its total sales) decreased 5% and were flat in Canadian dollars as majority of these sales are made in Canada. Again, volume dropped 42% in the quarter primarily due to customers rebalancing their inventories.

In the quarter under review, the Siding segment recorded adjusted EBITDA of $68 million, reflecting an increase of $7 million from the third quarter of 2017.

Engineered Wood Products (EWP): EWP sales grew 7.1% year over year to $105 million in the quarter. LSL volumes were up 30%, while LVL volumes were down 10% in the quarter. I-Joist volumes were up 4% from the year-ago quarter. Pricing was up 13% in LSL, 9% in LDL and 5% in I-Joist.

Adjusted EBITDA increased $1 million from the prior-year quarter.

South America: This segment comprises facilities in Chile, Brazil, as well as sales offices in Peru and Argentina. The segment sales were down 9.9% year over year to $34.5 million.

Adjusted EBITDA was $9 million compared with $12 million in third-quarter 2017.

Other: Net sales were $7.6 million in the quarter compared with $6.5 million a year ago.

Financials

Louisiana-Pacific ended the quarter with cash and cash equivalents of $986.7 million as of Sep 30, 2018 compared with $928 million on Dec 31, 2017. Long-term debt (excluding current portion) was $348.6 million, down from $350.8 million at the end of 2017.

Zacks Rank & Other Peer Releases

Currently, Louisiana-Pacific holds a Zacks Rank #5 (Strong Sell).

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

Weyerhaeuser Company’s (NYSE:WY) third-quarter 2018 earnings and sales missed the Zacks Consensus Estimate by 28.2% and 2.6%, respectively, owing to significant headwinds from severe weather, trade policy and unusually volatile wood products markets.

Universal Forest Products Inc. (NASDAQ:UFPI) reported mixed results in the third quarter of 2018, wherein earnings missed the Zacks Consensus Estimate while sales beat the same. Earnings and sales increased 20% and 15% year over year, respectively, driven by healthy segmental contributions.

Rayonier Inc. (NYSE:RYN) reported third-quarter 2018 net income per share of 18 cents, comfortably beating the Zacks Consensus Estimate of six cents. However, the bottom line was lower than the prior-year figure of 19 cents.

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