Why Louisiana-Pacific (LPX) Stock Is Down Today

NEW YORK (TheStreet) -- Louisiana-Pacific (LPX) was falling -2.7% to $15.45 Wednesday after terminating a takeover agreement with Ainsworth Lumber.

The two companies first announced the agreement on Sept. 4, 2013. Under the agreement, Louisiana-Pacific would have acquired all outstanding shares of Ainsworth.

The two companies determined that regulatory approvals for the deal could not be obtained without significant divestitures beyond what they originally planned.

"We have no choice but to terminate the agreement rather than accept the distraction, disruption, costs and risk of litigating this matter in both the U.S. and Canada, where the process could take upwards of a year," Louisiana-Pacific CEO Curt Stevens said in a statement.

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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. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.63, 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 3.53, which clearly demonstrates the ability to cover short-term cash needs.
  • LPX, with its decline in revenue, slightly underperformed the industry average of 9.3%. Since the same quarter one year prior, revenues fell by 16.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LOUISIANA-PACIFIC CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LOUISIANA-PACIFIC CORP increased its bottom line by earning $1.22 versus $0.20 in the prior year. For the next year, the market is expecting a contraction of 54.9% in earnings ($0.55 versus $1.22).
  • The gross profit margin for LOUISIANA-PACIFIC CORP is currently extremely low, coming in at 12.66%. It has decreased significantly from the same period last year.
  • Net operating cash flow has significantly decreased to -$73.00 million or 534.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: LPX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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