8. Louisiana-Pacific Corporation (NYSE:LPX)
Number of Hedge Fund Holders: 48
Eminence Capital’s Stake: $177,034,744
Louisiana-Pacific Corporation (NYSE:LPX) provides building solutions primarily for use in new home construction, repair and remodeling, and outdoor structure markets. The stock has performed well over the past year, jumping close to 20% in value on the back of strong revenue growth, improved profitability, and effective capital management. For Q1 2024, the firm reported revenue of $724 million, a 24% increase compared to the same quarter last year. This beat analyst estimates of $686 million, showcasing robust top-line growth. The EPS over the period was $1.53, significantly exceeding the consensus estimate of $1.13. This also marked an improvement from the EPS of the same period in the prior year, indicating enhanced profitability.
Other financial metrics also highlight the strong position of Louisiana-Pacific Corporation (NYSE:LPX) in the present market. The adjusted EBITDA for the firm in the first quarter of 2024 was $182 million, up from $66 million in the first quarter of 2023. This substantial increase underscored the improved operational efficiency and cost management of the firm. The firm also demonstrated the ability to convert revenue into profit more effectively, as the net income for Q1 2024 was $137 million, compared to $37 million in Q1 2023. The firm also paid out $57 million in dividends in the first quarter of the year, returning value to shareholders.
In its Q1 2024 investor letter, Cooper Investors, an asset management firm, highlighted a few stocks and Louisiana-Pacific Corporation (NYSE:LPX) was one of them. Here is what the fund said:
“Highlights are often the private site tours we undertake with portfolio companies, two worth discussing on this trip were with Louisiana-Pacific Corporation (NYSE:LPX) and Eurofins Scientific (Eurofins). LP is a business we invested in mid-2023 and represents a Low-Risk Turnaround where the proposition is a commodity-to-specialty transformation story. The company is a leading manufacturer of wood-based building materials produced from its 24 mills and finishing plants, comprising ~4bn sq. ft of Oriented Strand Board (OSB) capacity and ~2bn sq. ft of siding capacity. Historically, OSB was the core output of LP but is a commoditised product in which LP is a price-taker. Group profits and losses swung around and led to highly volatile earnings over the years for a business at the whim of the underlying OSB price.
Siding on the other hand is a genuinely differentiated product that gives LP pricing power and generates consistent incremental margins of 25-30%. Made in the same mills as OSB using engineered wood flake and embossed with a grain finish (a processing marvel we’ve witnessed first-hand at a Source: Company Disclosures, Redburn Atlantic mill in Upper Michigan), LP ‘Smartside’ is a sustainable way to wrap homes in an attractive durable substrate that is gaining popularity among small and medium builders…” (Click here to read the full text)
