Kevin Stanley
Long/short equity, event-driven, research analyst, CFA

Louisiana Pacific: Stumbling Out Of The Gate In 2014

Executive summary:

  • Reversion back to high historical correlation between OSB price and LPX stock implies near-term stock decline
  • Weak OSB pricing could result in further downside to 2014 consensus EBITDA estimate
  • Softening housing data showing limitations to 2014 end market demand
  • Valuation does not support fundamentals; short interest still low

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For Louisiana Pacific, (NYSE:LPX) a leading supplier of building material products, an optimistic outlook for the housing market in 2014 has created bullish investor sentiment. However, falling oriented strand board ('OSB') prices so far this year infer a vastly different story. A reversion back to the historically high correlation between OSB prices and LPX stock suggests a near-term decline in the share price. Particularly considering the recent...

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