Canfor Earnings: Operating Loss Narrows but Lumber Markets Still Challenged; Shares Remain Cheap

No-moat-rated Canfor posted first-quarter results that surpassed consensus estimates, driven partially by stronger pricing conditions in Europe. Pricing pressures in the North American lumber markets were steadfast, however, most notably the effects of a higher-for-longer interest rate environment and pronounced weakness in multifamily construction activity. Canfor’s reported operating loss for the quarter dropped to CAD 86 million from CAD 208 million a year ago, but sales were roughly flat year over year. This represents the sixth consecutive quarter of operating losses amid challenges in the lumber market. We've decreased our fair value estimate to CAD 23 per share from CAD 25 due to our expectation for softer near-term lumber pricing in North America.