Louisiana Pacific Corporation (LPX) is a leading manufacturer of quality engineered wood building materials including OSB, structural framing products, and exterior siding for use in residential, industrial and light commercial construction.
I see at least 5 reasons to buy the stock currently
1. Insider buying
The company filed a Form 4 on June 8th stating that Director Dunham Archie had purchased 383,500 shares of the company at $8.63 share price.
2. On a March year-to-date basis, single-family and multi-family housing starts are up 19% over the same period in 2011
The company stated during the first quarter earnings call:
So the big question is when will the housing market recover? At LP, we continue to be cautiously optimistic that the recovery is actually starting. Let me leave you with a few anecdotes. Housing starts were up 19% quarter-to-quarter with permits keeping pace. The inventory of new homes for sale is at the lowest level since statistics began to be captured, it's at 121,000. Vacancy rates, both for apartments and vacant homes for sale, continue to decline. The settlement with the 5 big banks in the various government programs under the mantle of make home affordable, seems to be having a positive effect on short sales and the bundling of foreclosures for investment purposes. This is reducing the risk of the foreclosure overhang.
Pending home for sales are on the rise. And there have been recent articles talking about bidding wars happening again in certain markets between home buyers and sellers. I can personally vouch for this as my daughter, who lives in San Francisco, and son, who lives in Portland, were involved in competitive transactions that ended with selling, buying a house above the asking price.
This earnings season has been positive for the homebuilders, and with the reporting of improved financial results and strong backlogs. The current consensus for 2012 stands at 711,000 single and multifamily housing starts, an increase of 17% compared to last year. For 2013, the consensus now stands at 875,000, a 23% increase over 2012.
3. Financials are improving
Total sales for the first quarter of $362 million were higher by 9 percent versus a year ago.
"All of our North American segments outperformed the same quarter last year," said Curt Stevens, chief executive officer. "For the first time in many years, the housing news has been positive and this was reflected in our results. Of particular note was the performance of our Siding segment where operating profit improved by more than 30 percent compared to the same quarter last year and more than doubled compared to last quarter."
During the first quarter earnings call Ms. Sallie Bailey, Executive Vice President and Chief Financial Officer stated:
Our operating results for the first quarter show improvement. Adjusted EBITDA of $21 million is 58% higher than the first quarter of 2011.
4. Analysts have raised price targets
During month of May 2012 there has been two upgrades.
|Upgrade||RBC Capital Mkts||Sector Perform → Outperform||$10 → $12|
|Upgrade||Deutsche Bank||Hold → Buy||$10 → $12|
5. The sector has seen some insider buying
I believe the stock could have a run into the range of $12-$14 during the next 12 months. The point and figure chart has an price objective of $14.50.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LPX over the next 72 hours.