Price of engineered-wood siding soars 38%, fueling earnings beat for LP Building

By Tomi Kilgore

Siding seller's stock soars into record territory after profit and sales jump above expectations

Shares of Louisiana-Pacific Corp. took flight Wednesday toward a fresh record close after the maker of wood building products beat first-quarter earnings expectations and raised its full-year outlook, as strong demand and a big jump in prices provided a boost.

"The first quarter saw robust demand for Siding and [oriented strand board], with increased volume, including record ExpertFinish and BuilderSeries volume, higher commodity prices, and improved operating efficiency driving margin expansion," said Chief Executive Brad Southern.

ExpertFinish and BuilderSeries are product brands in the siding segment of the company, which does business as LB Building Solutions.

The stock (LPX) soared 19.4% in afternoon trading, to put it on track to close above its record close of $83.91, set on March 28, 2024. The stock was also headed for the biggest one-day gain since it rocketed a record 26.6% on March 24, 2020.

Southern said on the post-earnings call with analysts that in the OSB business, commodity prices "were meaningfully hotter" than last year. As a result, he said, according to an AlphaSense transcript, average selling prices in the business were 38% higher than last year.

Sales volumes were also higher, with unit shipments up 36%.

The siding business wasn't as strong, with average selling prices up 5% and unit shipments rising 4%.

Overall, net income climbed to $108 million, or $1.48 a share, from $21 million, or 29 cents a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of $1.53 were well above the FactSet consensus of $1.12.

Sales grew 24% to $724 million, above the FactSet consensus of $686.8 million.

Siding sales increased 9.1% to $361 million, to beat the FactSet consensus of $347.5 million, while OSB sales jumped 65.6% to $313 million to beat expectations of $280.9 million.

Cost of sales rose much less than sales, up 5.8% to $511 million, to push gross margin up by 12.3 percentage points to 29.6%.

"In general, OSB prices climbed significantly at the end of the first quarter and remained elevated through most of April until our recent pullback," Southern said.

That and the strong first-quarter results prompted the company to lift its full-year outlook.

For 2024, the company now expects siding net sales growth of 11%-13%, up from previous growth guidance of 8%-10%.

For overall adjusted earnings, excluding interest, taxes, depreciation and amortization, a metric used to gauge underlying profitability, the company raised its outlook to $655 million-$685 million from $495 million-$525 million.

The stock has run up 23.1% year to date, while the S&P 500 SPX has advanced 8.7%.

-Tomi Kilgore

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05-08-24 1527ET

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