On Mar 4, Zacks Investment Research downgraded Louisiana-Pacific Corp. LPX to a Zacks Rank #5 (Strong Sell) following negative estimate revisions.
Estimates of this premier supplier of building materials have gone down since the company reported disappointing fourth-quarter 2014 financial numbers on Feb 11.
Why the Downgrade?
Louisiana-Pacific’s fourth-quarter 2014 adjusted loss per share of 23 cents was wider than the Zacks Consensus Estimate of a loss of 15 cents per share. The quarterly loss incurred by the company was also significantly wider than the year-ago quarter loss of 6 cents per share. The weak bottom line performance was due to reduced prices of Oriented Strand Board (OSB) and lower earnings before interest, taxes, depreciation and amortization (EBITDA).
The company has been posting losses for the last five consecutive quarters. The company posted declining prices in the OSB segment throughout 2014, which also eroded revenues.
Net sales in the fourth quarter decreased 5% year over year to $454 million and lagged the Zacks Consensus Estimate of $457 million by 0.7%. Other than poor performance at the OSB, revenues were also affected by weakness in the South America segment.
The South America segment, which produces OSB structural panel and siding products in Chile and Brazil, has been reporting soft sales due to weaker economies in its operating regions.
The lackluster performance can also be attributed to log outages affecting siding production and softer Engineered Wood Products (EWP) sales.
Other Stocks to Consider
Some better-ranked stocks in the broader building sector include TRI Pointe Homes, Inc. TPH, Toll Brothers Inc. TOL and Graña y Montero SAA GRAM. While TRI Pointe Homes and Graña y Montero sport a Zacks Rank #1 (Strong Buy), Toll Brothers carries a Zacks Rank #2 (Buy).
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