Louisiana-Pacific is the IBD Stock Of The Day. LPX stock flashed buy signals Tuesday after the big lumber producer jumped on better-than-expected first-quarter earnings.
Lumber product prices have risen as the housing market, labor market and supply chain remain tight. Wildfires and other climate issues have also continued to cut into lumber supplies.
LPX Stock
LPX stock rallied 8.9% to 71.95 in the stock market today. Investors could buy the stock now, after it rebounded from its 50-day and 200-day lines and reversed a broader downtrend that began in January.
However, the weak market action in recent months should keep investors cautious about making any new buys.
The stock's official buy point is 79.87.
The relative strength line is already at a consolidation high and just below the long-term peak set in May 2021. The RS line, the blue line in the chart provided, tracks a stock's performance vs. the S&P 500. An RS line hitting new highs before the stock does is an especially bullish signal.
LPX stock has a 95 Composite Rating. Its EPS Rating is 92.
Weyerhaeuser, another big lumber manufacturer that oversees millions of acres of timberland in the U.S., tried to break out last week following its earnings. Shares were up 2.8% Tuesday to 41.17, but below a 42.73 buy point of a cup-with-handle base.
Boise Cascade reports earnings on Friday. BCC stock climbed 3.9% to 79.39, moving toward an 82.20 handle entry.
Rising Prices Lift LPX Stock
When Covid first hit in 2020, sawmills pulled back on operations. But that left them scrambling to catch up with the homebuying and home-renovation boom that followed that year, as customers sought to take advantage of low interest rates, flee cities or build additions to their houses.
Lumber prices, in the process, rocketed higher. They have occasionally eased in the pandemic era, and are currently off highs reached last year and this year. But the supply-chain crunch, tariffs on Canadian lumber and an aggressive wildfire season in the Western U.S. and Canada have kept prices elevated, the National Association of Homebuilders said in January.
The group estimated then that soaring lumber prices raised the price of a typical new single-family home by more than $18,600. Concerns have grown more recently that rising mortgage rates could hurt housing demand.
Louisiana-Pacific is one of the largest producers of oriented strand board, or OSB — the flat boards composed of pressed-together wood shards often used as paneling in residential construction. OSB prices were 23% higher during the first quarter, LP said.
The company also makes so-called engineered lumber products, or products that connect precut or otherwise processed pieces of wood with adhesive to offer more structural support. Those products include I-joists, often used to frame roofs or floors, and laminated veneer lumber, often used for headers in beams.
Prices for those products also jumped, on higher input costs, LP said. LP also makes trims and sidings. LPX stock is up some 18% over the past 12 months.
In total, LP earned $5.08 per share during the quarter, a 69% jump. Sales rose 31% to $1.337 billion. Both were hefty accelerations vs. Q4 2021.
Louisiana-Pacific during Q1 declared a quarterly cash dividend of 22 cents per share, and paid $104 million to buy back stock.
As of Tuesday, it said it had paid an extra $182 million to repurchase 2.9 million shares. That left $214 million under a $500 million buyback program. It said it had additional buyback authorization of $600 million.
Along with LPX stock and wood products firms, other makers of building and construction products have done well recently.
Atkore, which makes electrical products like cables and conduits for buildings, jumped 13% on Tuesday, following its earnings results. Beacon Roofing Supply, up 0.9% on Tuesday, was Monday's Stock of the Day.
