UPDATE: BMO Capital Downgrades Louisiana-Pacific Corp (LPX) and Norbord (OSB) to Market Perform
- Wall St. touches two-week high on deals, strong earnings
- Unusual 11 Mid-Day Movers 10/24: (UNIS) (MBVT) (ACCO) Higher; (TDW) (INO) (BCC) Lower
- AT&T (T) to Acquire Time Warner (TWX) for $107.50/Share
- Rockwell Collins (COL) to Acquire B/E Aerospace (BEAV) for $6.4B
- TD Ameritrade (AMTD) to Acquire Scottrade in $4B Cash & Stock Deal
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
(Updated - August 8, 2016 8:31 AM EDT)
"Both stocks are at/near respective price targets: $20 on LPX and US$26 on Norbord. Both have performed well on the back of a strong rally in N.A. OSB prices," said Wilde. "But, strong OSB prices have shifted focus to supply additions. Any meaningful capacity increase appears unlikely before mid/late-2017. Roy O. Martin's new 750K/msf mill in East Texas will start up during 4Q17."
The analyst continued, "Recent reports in the trade press suggest that privately held Tolko is considering a restart of its 650K/msf High Prairie mill in Alberta. In total, there is ~2.4Bsf of 'idled' capacity on the sidelines--the equivalent of 11-12% of current industry supply. If too much of capacity is restarted, prices could fall even with an improving demand backdrop."
"The OSB industry has historically been highly fragmented, with little supply discipline. A late 2012/early-2013 flurry of mill restarts is only the most recent example. While one can argue that a slower growing and an increasingly consolidated industry will think/act differently in the future, we remain wary about hanging too much of an investment thesis on that argument. It is possible, but it remains an unproven hypothesis. With LPX above $20 and NBD above US$25, we think the prudent decision is to move to the sidelines," Wilde added.
Shares of Louisiana-Pacific Corp closed at $20.30 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- BMO Capital Raises Price Target on ManpowerGroup (MAN) Following 3Q Surprise
- JPMorgan Downgrades ARIAD Pharmaceuticals (ARIA) to Underweight
- H.C. Wainwright Downgrades Vertex (VRTX) to Neutral
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Downgrades
Related EntitiesBMO Capital
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!