Several sawmills were closed amid the COVID-19 pandemic as lockdown mandates and travel restrictions caused a labor shortage. The low supply and rising demand from the booming housing market have been driving rising lumber prices. Along with demand for the construction of new homes, home-renovation trends amid the pandemic have contributed to the increase in demand for lumber. Lumber prices have tripled over the past year and are expected to keep rising.
According to the National Association of Home Builders (NAHB), the surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multi-family home. And because interest rates are expected to remain low for the foreseeable future, rising housing activities should continue to drive-up lumber prices.
Given this backdrop, we think it is wise to bet on Louisiana-Pacific Corporation (LPX), PotlatchDeltic Corporation (PCH), and Masonite International Corporation (DOOR) because they are likely to benefit from the rise in lumber prices.
Louisiana-Pacific Corporation (LPX)
LPX is a manufacturer of building products. The company’s products are used in home construction, repair and remodeling, and outdoor structures. It operates through four segments—North America Oriented Strand Board (OSB), Siding, Engineered Wood Products (EWP) and South America.
LPX’s $1.02 billion in net sales for its fiscal year 2021 first quarter, ended March 31,represents a 73.9% year-over-year rise. Its gross profit has increased 343.5% year-over-year to $479 million and its operating earnings have increased 879.5% year-over-year to $431 million. The company’s net earnings increased 869.7% year-over-year to $320 million. Also, its adjusted EPS came in at $3.01 for the quarter, which represents a 785.3% year-over-year increase.
Analysts expect its EPS to be $4.06 for the current quarter, ending June 30, 2021, which represents an 844.2% year-over-year rise. Its revenue is expected to increase 118.4% year-over-year to $1.16 billion in the current quarter. LPX surpassed consensus EPS estimates in all four trailing quarters.
The company’s board of directors declared a $0.16 cash dividend per share for common shareholders, payable on June 1. This reflects the company’s fundamental strength. The stock has gained 263.5% over the past year to close Friday’s trading session at $72.73.
It’s no surprise that LPX has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Quality, and a B grade for Momentum and Growth. Click here to see LPX’s ratings for Value, Sentiment and Stability as well.
LPX is ranked #26 of 54 stocks in the A-rated Industrial-Building Materials industry.
PotlatchDeltic Corporation (PCH)
Real estate investment trust (REIT) PCH is primarily engaged in activities associated with timberland management, including the sale of timber, management of timberlands, and purchase and sale of timberlands. The company is also engaged in the manufacture and sale of wood products. It operates through three segments— Resource, Wood Products and Real Estate.
For its fiscal year 2021 first quarter, ended March 31, PCH’s net sales increased 69.6% year-over-year to $354.20 million. Its adjusted EBITDA came in at $195 million, up 309.7% year-over-year. The company’s net income increased 880.4% year-over-year to $131.10 million. Also, its EPS came in at $1.94, which represents an 781.8% year-over-year rise.
Analysts expect the company’s EPS and revenue to increase 5,775% and 132.8%, respectively, year-over-year to $2.35 and $408.52 million for the current quarter, ending June 30, 2021.
PCH declared a $0.41 quarterly distribution per share on the company’s common stock, payable on June 30. This affirms the company’s strong fundamentals. The stock has rallied 87.1% over the past year and closed yesterday’s trading session at $63.44. It is currently trading just 0.9% below its $63.99 52-week high, which it hit on April 26, 2021.
PCH’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It also has a B grade for Value and Quality. In addition to these, one can see PCH’s ratings for Stability, Sentiment, Momentum and Growth here.
PCH is ranked #1 of 53 REITs in the REITs-Diversified group.
Masonite International Corporation (DOOR)
DOOR designs, manufactures, markets, and distributes interior and exterior doors for the new construction and repair, renovation, and remodeling sectors of the residential and non-residential building construction markets worldwide. Its products include molded panel, flush, steel, and fiberglass residential doors, and architectural interior doors, among others.
The company’s $646 million in net sales for its fiscal year 2021 first quarter (ended April 4, 2021) represents a 17% year-over year rise. DOOR’s gross profit increased 18.1% year-over-year to $158.63 million. Its adjusted EBITDA came in at $102 million, which represents a 24.4% year-over-year increase. The company’s net income also increased 56.7% year-over-year to $47 million. Also, its EPS came in at $1.92, up 60% year-over-year.
Analysts expect DOOR’s EPS to increase 43.3% year-over-year to $2.15 for the quarter ending June 30. Its revenue is expected to increase 10.3% year-over-year to $648.23 million for the quarter ending September 30, 2021. It surpassed consensus EPS estimates in each of the four trailing quarters.
On March 29, DOOR announced the launch of DuraStyle exterior wood doors with AquaSeal technology, which is engineered to protect the natural beauty of wood doors. This innovative product is expected to increase its sales. The stock has gained 108.1% over the past year and closed Friday’s trading session at $129.92.
DOOR’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. It has a B grade for Momentum, Stability and Quality. Click here to see the additional POWR Ratings for DOOR (Growth, Value and Sentiment).
DOOR is ranked #2 of 8 Stocks in the A-rated Home Equipment & Goods industry.
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LPX shares were trading at $75.48 per share on Monday afternoon, up $2.75 (+3.78%). Year-to-date, LPX has gained 103.79%, versus a 13.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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