This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Preview: Louisiana-Pacific Lacks Post-Sandy Momentum

LPX Chart LPX data by YCharts
NEW YORK ( TheStreet) -- Which way will Louisiana-Pacific (LPX - Get Report) go? The stock is down 20% over the past several weeks, down 6% on the year. However, several weeks ago, shares reached a new 52-week high of $22.55. Now heading into the company's first-quarter earnings report on Tuesday, it seems investors are expecting the worst. Otherwise, why else would the stock be down 20% in a matter of weeks?

Is the 'Sandy Effect' Over?

Despite LPX's ups and downs, the stock's not cheap -- sporting a P/E that is 3 times that of rival Weyerhaeuser (WY - Get Report). However, given LP's recent stock movement and the fact that the company is so closely tied to the housing recovery, it's anyone's guess where the shares are heading next.

There are two frames of thought here, one being on the company and the other being on the overall housing recovery. In terms of LPX, it's more of a cautious tenor, which (in my opinion) was spurred by management's own words. That's why investors have decided to take profits ahead of the first-quarter earnings report.

At the same time, the long-term direction of the overall industry is still positive, which is why the stock, by virtue of its high P/E, is being valued higher than the S&P 500. Of the 13 analysts covering the stock, the consensus estimate is 45 cents per share, while revenue is expected to come in $558 million. Management, however, offered no specific guidance during the fourth-quarter report, other than to say that it will tread cautiously. LPX has a P/E of 92 vs. WY's P/E of 34.

TheStreet's Jim Cramer correctly predicted Louisiana-Pacific's initial stock surge, while citing Hurricane Sandy as a likely catalyst. When Cramer made his bullish call last November, LP was trading at around $14.72. And given that the stock soared to $22.55 in March, representing gains of 53%, it seems that LP has peaked. Meanwhile, Weyerhaeuser, which was also on Cramer's bullish list, has posted gains of 23% and is still up 11% on the year.

Whether the "Sandy Effect" is still in play, depends on what metric you use. For Weyerhaeuser, the debate is certainly up in the air, especially since the company is still posting 30% revenue growth. For Louisiana-Pacific, though, I'm inclined to believe that the "Sandy Effect" is over -- at least the Street seems to think so, even though the stock is being priced with the anticipated housing recovery.

With first-quarter earnings on tap, management's main objective should be to rebuild and strengthen a seemingly fragile base of investors.

Expectations for the Quarter

Despite the fact that LP is coming off a strong fourth quarter, during which revenue rose a year-over-year 47% on the strength of the housing recovery, management didn't seem too confident that this level of performance was sustainable. Guidance was overly cautious, if not filled with complete terror that there would be an imminent reversal in the consensus housing forecasts.

During the fourth-quarter conference call in February, Louisiana-Pacific's CEO, Curtis Stevens, first spoke favorably about the housing recovery:
"The current consensus for housing forecast stands at about 990,000 for 2013 and right at 1.2 million (starts) for 2014. New-home inventory remains very, very low, at about 125,000 and that includes both completed homes for sale and homes under construction. And then existing home inventory is down 23% compared to the same time last year. And home prices are on the rise and mortgage rates are low, so I'm confident that the momentum that we have seen recently in housing starts will continue as pent-up demand is very large. ..."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LPX $16.59 0.00%
WY $32.02 0.00%
AAPL $95.03 0.21%
FB $116.73 0.00%
GOOG $691.02 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs