Louisiana-Pacific Corporation LPX posted mixed second-quarter 2015 results with a narrower loss than the Zacks Consensus Estimate, while revenues missed the same. In response, shares of the company went up 4.5%.
Adjusted loss per share of 8 cents was narrower than the Zacks Consensus Estimate of a loss of 10 cents. However, the quarterly loss incurred by this premier supplier of building materials was significantly wider than the year-ago quarter loss of 3 cents per share.
Net sales of $493 million in the quarter missed the Zacks Consensus Estimate of $514 million by 4.1% and decreased 5% year over year, as unfavorable weather in the central region of the country, particularly in Texas, led to weak pricing of Oriented Strand Board (OSB).
Adjusted EBITDA from continuing operations was $16 million in the quarter, down 38.5% year over year. Selling and administrative expenses increased 5.5% year over year to $38 million in the second quarter of 2015 due to higher information technology costs, and sales and marketing-related expenses.
Segmental Analysis
Oriented Strand Board (OSB): The OSB segment manufactures and distributes OSB structural panel products.
Sales in the segment decreased 6% year over year to $211 million owing to a 15% decline in pricing partially offset by a 11% increase in volume.
Siding Segment: The Siding segment is engaged in the production and marketing of siding products and related accessories, hardboard siding and accessory products, and vinyl siding products and accessories. These products are used for new construction as well as for repair and remodeling. The division has three categories: SmartSide, CanExel siding products, and commodity OSB.
Sales at the segment declined 3% year over year to $164 million due to softer volumes of the SmartSide category. SmartSide volumes decreased 6% year over year, as sales in Texas and Oklahoma were affected by a humid weather. However, SmartSide average sales price climbed 4% year over year.
Meanwhile, CanExel siding prices decreased 7% in U.S. dollars and increased 11% in Canadian dollars. CanExel volumes were up 14% owing to higher Canadian demand.
Engineered Wood Products (EWP): The segment produces goods used in new constructions like I-Joist (IJ), Laminated Veneer Lumber (LVL), and Laminated Strand Lumber (LSL).
Engineered Wood Products sales decreased 5% year over year to $72.0 million in the quarter. On a year-over-year basis, volumes of IJ dropped 10%. Volumes also decreased 2% for both LVL and LSL.
Pricing was down 1% at IJ, owing to rising cost of raw materials. Prices were down 3% at both LVL and LSL, as more industrial products were sold at lower prices.
South America Segment: Segment sales declined 8% year over year to $39 million owing to softer volumes in Brazil and lower prices in Chile and Brazil. Volumes in Chile increased 16%, driven by higher demand in the housing market. Volumes in Brazil declined 21%, owing to economic recession and lower exports to China. Pricing declined 7% in Chile and 24% in Brazil. In local currency, Chile pricing increased 4% year over year while that in Brazil was flat year over year.
Outlook
The company is optimistic about the improving demand for its products in the second half of 2015 driving by an increase in building construction activities, and formation of new households. However, the company expects labor shortages and a possibility of higher interest rate to act as headwinds in the upcoming quarters.
Louisiana-Pacific carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Stocks in the building/construction sector that are worth considering are U.S. Concrete, Inc. USCR, Rayonier Inc. RYN and Universal Forest Products Inc. UFPI. While U.S. Concrete and Rayonier sport a Zacks Rank #1 (Strong Buy), Universal Forest Products carries a Zacks Rank #2 (Buy).
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