Top Quant Scores for Boise Cascade and Louisiana-Pacific

12/12/2017 5:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Richard Moroney selects stocks in part by a quantitative ranking system called Quadrix, which rates stocks on dozens of fundamental and technical variables on a score from 1 to 100. Here, the editor of Upside looks at two firms in the wood products sector which score 99 and 100.

Louisiana-Pacific (LPX) has delivered nine consecutive quarters of year-to-year improvement in gross profit margin and seven quarters of higher net margins. A leading maker of wood building materials, Louisiana-Pacific is benefiting from favorable siding prices, an improved product mix, and higher sales volumes.

In the September quarter, revenue advanced 20% and per-share earnings more than doubled. CEO Brad Southern said, “We had our strongest third quarter performance in 12 years.” The company has posted at least 18% revenue growth in six straight quarters.

Steady growth in single-family housing starts, millennials entering the housing market, and encouraging builder confidence bode well for Louisiana-Pacific.

In addition, replacing and repairing homes damaged by hurricanes Harvey and Irma should spur additional demand for the company’s core product: structural wood panels. The stock, earning the maximum Overall Quadrix rank of 100, is rated Buy.

These are heady times for Boise Cascade (BCC). Shares have rallied 74% so far in 2017, fueled largely by outstanding operating momentum. The maker of building materials posted September-quarter earnings per share of $0.81, up 98%, on sales of $1.23 billion.

The consensus called for per share earnings of $0.69 on sales of $1.17 billion. Boise has beaten the consensus by at least 17% in three of the last four quarters. Encouragingly, per-share-profit estimates are trending higher, offering confidence in Boise’s ability to deliver more capital gains in the year ahead.

One of the largest producers of engineered wood products and plywood in North America, Boise is capitalizing on a healthy housing market and robust demand for repairs and remodeling, particularly following hurricanes Harvey and Irma. Established relationships with builders, suppliers, and home improvement retailers help boost market share and drive sales.

For 2017, Wall Street expects per-share profits of $1.93, up 84%. The consensus was $1.64 two months ago. Per-share earnings are projected to advance 21% to $2.34 next year. Boise — with an overall Quadrix ranking of 99 — is being initiated as a Buy.

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