Boise Cascade (NYSE: BCC) reported Q4 EPS of ($1.85), versus $0.49 reported last year. Revenue for the quarter came in at $1.065 billion versus the consensus estimate of $1.09 billion.

“While both of our businesses' financial results for the fourth quarter reflect seasonally weaker housing data and the ongoing challenges of declining commodity prices, 2018 was a year of accomplishment. Our full year financial results, excluding facility sale and curtailment charges, showed strong improvement from 2017 and were at the highest levels we have delivered since reemerging as a public company in 2013,” commented CEO Tom Corrick. “We refined the footprint and focus of our Wood Products manufacturing operations. At the same time, we completed three acquisitions that expanded our nationwide building materials distribution capabilities. These actions, along with significant steps taken to mitigate our exposure to legacy pension risks, leave us well-positioned as we begin 2019.”

Outlook

We expect to experience slower demand growth for the products we manufacture and distribute in 2019. The February 2019 Blue Chip consensus forecast for 2019 reflects 1.27 million total U.S. housing starts, a less than 2% expected increase from estimated 2018 levels. Although we believe U.S. demographics are supportive of further recovery in housing starts, we expect near-term residential construction growth to be flat or only modestly improving due to constraints faced by builders, such as availability of labor and building lots, as well as affordability constraints faced by prospective buyers. The pace of household formation rates and residential repair-and-remodeling activity will be affected by continued employment growth, wage growth, prospective home buyers' access to and cost of financing, housing affordability, improved consumer confidence, as well as other factors. Improved household formation rates in turn will help stimulate new construction. In addition, the size of new single-family residences as well as the mix of single and multi-family starts will influence product consumption.

Commodity products pricing was very volatile during 2018, with rapidly rising prices in the first six months of the year followed by sharp price declines during the second half of the year. As a plywood manufacturer and a wholesale distributor of a broad mix of commodity products, periods of increasing commodity prices provide us the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability like we experienced in the second half of 2018. Although we expect slower demand growth and additional industry capacity to limit the magnitude of price increases during 2019, future commodity product pricing and commodity input costs will likely remain volatile in response to industry operating rates, net import and export activity, transportation constraints or disruptions, inventory levels in various distribution channels, and seasonal demand patterns. As we begin 2019, composite panel and lumber pricing indices are approximately 25% below average levels experienced in the first quarter of 2018, and absent meaningful price increases from current levels, we expect our year-over-year financial comparisons to be negative in the first half of 2019.

Consistent with our historical patterns, we expect working capital increases to use cash in the first quarter of 2019. In addition, we expect our capital spending, excluding acquisitions, to be $85-$95 million in 2019, including spending to expand our veneer production capabilities at our Chester, South Carolina, and Florien, Louisiana facilities.

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