Louisiana-Pacific Corporation (NYSE:LPX) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 2.1% to hit US$814m. Louisiana-Pacific reported statutory earnings per share (EPS) US$2.23, which was a notable 15% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Louisiana-Pacific's eleven analysts currently expect revenues in 2024 to be US$2.88b, approximately in line with the last 12 months. Statutory earnings per share are forecast to fall 19% to US$5.13 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.90b and earnings per share (EPS) of US$5.45 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 6.0% to US$99.30, suggesting the revised estimates are not indicative of a weaker long-term future for the business. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Louisiana-Pacific analyst has a price target of US$138 per share, while the most pessimistic values it at US$65.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 3.3% annualised decline to the end of 2024. That is a notable change from historical growth of 4.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Louisiana-Pacific is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Louisiana-Pacific. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Louisiana-Pacific going out to 2026, and you can see them free on our platform here..
Even so, be aware that Louisiana-Pacific is showing 1 warning sign in our investment analysis , you should know about...
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.