UPDATE: BMO Capital Downgrades Boise Cascade Company (BCC) to Market Perform
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(Updated - August 8, 2016 8:25 AM EDT)
BMO Capital downgraded Boise Cascade Company (NYSE: BCC) from Outperform to Market Perform with a price target of $30 (unchanged). Analyst Mark Wilde sees challenges in the second half of the year.
"While BCC remains well-positioned to benefit from recovery in residential housing, we think H2 could see some challenges from both new capacity entering the U.S. plywood market and evidence of producers jostling for market share in the engineered wood products market," said the analyst.
Wilde continued, "Since hitting a low of $13.80 in early February following its much-weaker-than-expected 4Q results, the BCC shares have rallied more than 100%. Among the key drivers have been improved housing activity, recent strengthening of the Brazilian real (easing pricing pressure from imported plywood) and solid performance in building materials distribution. The recent acquisition of G-P's engineered wood business creates further runway for BCC. However, we think H2 could prove to be challenging. Key issues: the pending start-up of the 400K/msf plywood mill in Louisville, MS will add 4% to N.A. plywood consumption (N.A. demand is essentially flat)."
"At the same time, plywood imports from Brazil have remained high (May +225% y/y, YTD through May +151%). Both of these could pressure plywood prices, especially as the new capacity ramps up. In the last three weeks, the Random Lengths Southern Plywood Composite has dropped $17/msf. Finally, we are hearing reports of producers jostling for market share in EWP. Against this backdrop, we think the prudent decision is to move to the sidelines. We acknowledge that BCC's valuation is not challenging. We also believe that BCC is one of the best-run wood products/building materials distributors in North America," added the analyst.
Shares of Boise Cascade Company closed at $27.89 yesterday.
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