Louisiana-Pacific: Good Execution And Market Share Gains Should Drive Upside

Investment Thesis - Louisiana-Pacific Corporation (LPX) is expected to achieve continued growth through capacity expansion, enhanced sales efforts, and marketing initiatives despite macroeconomic challenges [2] - The partnership with Lennar is driving growth in the BuilderSeries product line, which can be replicated with other builders to enhance revenue [2] - A potential recovery in the housing market is anticipated as interest rates begin to reverse, benefiting the company's revenues [2] - The aging housing inventory supports long-term revenue growth in the Repair and Remodel (R&R) market [2] Revenue Analysis and Outlook - In Q2 2024, LPX's sales rose by 33.2% year-over-year to $814 million, driven by volume and price increases in the Siding and OSB segments [3][4] - The Siding segment saw a revenue increase of 29.7% year-over-year, with a 22% volume growth and a 6% increase in unit prices [3] - OSB segment revenues grew by 53.3% year-over-year, attributed to a 34% price increase and improved product mix [4] Margin Analysis and Outlook - LPX's adjusted EBITDA margin expanded by 1290 basis points year-over-year to 28.1% in Q2 2024, supported by price and volume increases [9] - The Siding segment's adjusted EBITDA margin increased by 690 basis points year-over-year to 25.3%, aided by reduced costs in freight, raw materials, and labor [9] - The OSB segment's adjusted EBITDA margin rose by 1950 basis points year-over-year to 35.6%, reflecting higher prices and volumes [10] Valuation and Rating - LPX stock is trading at an EV/EBITDA (TTM) of 9.65x, which is a discount compared to its peer James Hardie Industries (JHX) at 14.16x [13] - The company's engineered wood-based siding offers advantages such as lower price and easier installation, which may lead to a higher valuation multiple in line with JHX [14] - Given the growth prospects and potential for valuation re-rating, LPX stock is rated a buy [14]