West Fraser Earnings: Declining Lumber and OSB Prices Add to Near-Term Headwinds

No-moat-rated West Fraser reported lackluster third-quarter results as a downturn in pricing weighed heavily on earnings. While West Fraser reaped the benefits of robust OSB pricing in the first half of the year, falling prices during the quarter more than offset shipment growth. Net sales in the quarter tumbled almost 16% year over year as every segment reported significant declines, and West Fraser reported a $108 million operating loss. This loss was driven by the company's lumber business, which was also negatively affected by lower lumber prices in the quarter. West Fraser continues to navigate a challenging operating environment where higher interest rates have frozen existing home sales even as the repair and remodel end-market demand remains constrained. As such, we've decreased our fair value estimates for New York Stock Exchange and Toronto Stock Exchange-listed shares to $90 from $94 and to CAD 125 from CAD 129 per share, respectively.