West Fraser Earnings: Weather Disruptions Weigh on Shipments but Pricing Gains Offer Some Relief

No-moat-rated West Fraser reported first-quarter results that were largely in line with our expectations. Net sales fell 10% year over year, driven by weakness in the company’s North America engineered wood product business. That said, West Fraser reported a USD 65 million operating profit, up from USD 48 million a year ago as the lumber business reported its first quarterly operating profit in over two years. This was driven by pricing gains in lumber in the quarter but partially offset by lower shipments due to weather disruptions. Nevertheless, West Fraser is still navigating a challenging operating environment as higher interest rates constrain the housing market, and the impact of new tariffs could cause a slowdown in building and subsequent decline in lumber demand. As such, we've decreased our fair value estimates for New York Stock Exchange and Toronto Stock Exchange-listed shares to $87 from $90 and to CAD 121 from CAD 128 per share, respectively.