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Tickers in this Article: LPX
Louisiana-Pacific Corporation (LPX) reported an adjusted EPS of 2 cents per share from continuing operations in the second quarter of 2012 missing Zacks Consensus Estimate of 4 cents. The earnings, however, improved from the prior-year quarter loss of 19 cents. Net sales in the quarter improved 18% to $428 million, owing to higher volumes at Oriental Strand Board (OSB) and Siding segments and price increases  at the OSB segment. Revenues also beat the Zacks Consensus Estimate of $419 million, attributable to strong performance of the OSB and Siding segments.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $37 million versus a loss of $4 million in the prior-year quarter.

Segment Details

Oriental Strand Board (OSB): Louisiana-Pacific's OSB segment manufactures and distributes OSB structural panel products. Sales in the segment grew 38% to $195 million in the quarter, owing to an increase in housing activity.

The segment witnessed volume growth of 13% and a pricing gain of 22%. The segment recorded an operating income of $17 million, attributable to pricing benefits in the quarter, compared to a loss of $23 million in the prior-year quarter.

Composite Wood Products/Siding: The Siding segment manufactures wood-based siding (SmartSide and CanExel siding) and related accessories that are used for new constructions as well as for repair and remodeling. Sales in the Siding segment improved 16% to $137 million benefiting from increased new housing activity in the quarter.

The average sales price of SmartSide was up 2% year over year while that of CanExel was up 1%. SmartSide volumes improved 9% year over year driven by continuous penetration in the retail, repair and remodel markets. CanExel siding volume was down 31% due to supply chain problems. The segment recorded an operating income of $19 million in the quarter, up from $11 million recorded in the prior-year quarter.

Engineered Wood Products (EWP): The EWP segment makes I-Joists, laminated veneer lumber (LVL) and laminated strand lumber (LSL), which is primarily used in new construction activities. Engineered Wood Products sales decreased 4% year over year to $52 million in the quarter. Volumes of I-Joists were up 17% while volumes of LVL and LSL were down 9%, owing to decline in international sales.

Pricing was down 2% in I-Joists, LVL and LSL, due to changes in product mix and flat pricing. The segment's operating loss of $3 million was flat on a year-over-year basis.

South America: The segment manufactures OSB structural panels and siding products in Chile and Brazil. Segment sales surged 7.5% to $43 million. Volumes in Chile were up 30%, on the back of strong demand for wooden housing while volumes in Brazil were down 27%, due to lower demand from export markets particularly China. The segment's operating income of $4 million was flat on a year-over-year basis.

2012 Outlook

Louisiana-Pacific is optimistic about the low mortgage rates, increase in housing construction activity and overall improvement of the housing market. However, the company is cautious about the financial crisis in Europe.

Currently, we have an Outperform recommendation on Louisiana-Pacific Corporation. The company carries Zacks #2Rank in the near term (Buy rating).

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