Louisiana-Pacific (LPX) Stock Upgraded at RBC Capital Markets
NEW YORK (TheStreet) -- RBC Capital Markets upgraded Louisiana-Pacific (LPX) - Get Report to "top pick" from "outperform" on Wednesday, raising its price target for the building materials company to $22 from $20.
Shares of Louisiana-Pacific were gaining by 1.95% to $17.21 in morning trading.
The analyst firm raised its 2015 EPS estimates for Louisiana-Pacific to 65 cents a share from 51 cents a share. RBC also raised its 2016 EPS estimates for the company to $1.23 a share from $1.08 a share.
The upgrade and EPS estimates increases come a day after Louisiana-Pacific reported its third quarter financial results, which fell below analysts' estimates.
RBC analyst Paul C. Quinn expects the recent rally in Oriented Strand Board (OSB) prices to continue through 2016, which, along with a supportive outlook for the company's siding business, will help increase its stock price.
"LP commented that the OSB price gains were likely driven by poor weather (constraining supply) and the inventory drawdown in H115," Quinn wrote. "With the help of a mild fall, LP believes the rally could continue into 2016. CEO Stevens highlighted that he expects higher activity levels in all segments based on conversations with customers."
Separately, TheStreet Ratings team rates LOUISIANA-PACIFIC CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate LOUISIANA-PACIFIC CORP (LPX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.95, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 173.02% to $41.50 million when compared to the same quarter last year. In addition, LOUISIANA-PACIFIC CORP has also vastly surpassed the industry average cash flow growth rate of -27.28%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Paper & Forest Products industry and the overall market, LOUISIANA-PACIFIC CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LOUISIANA-PACIFIC CORP is currently extremely low, coming in at 10.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.95% trails that of the industry average.
- You can view the full analysis from the report here: LPX