Shares in siding and oriented strand board (OSB) company Louisiana-Pacific(NYSE: LPX) had risen by 17.1% for the week as of Friday morning. The little-followed stock is part of Warren Buffett's Berkshire Hathaway portfolio.
That startling rise in the share price was powered by an excellent set of first-quarter results that saw Louisiana-Pacific blow past its guidance and led management to significantly boost its full-year guidance. It was all the more surprising given the weakness reported by other companies (such as Whirlpool) whose businesses are tied to the housing sector.
Louisiana-Pacific's great quarter is just the start
The company outpaced its earnings guidance in both the siding and OSB segments in the first quarter. The siding segment's adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) of $90 million was significantly better than the company's guidance for $65 million to $70 million, while the OSB segment's adjusted EBITDA -- also $90 million -- was ahead of guidance for $65 million to $75 million.
The impressive Q1 performance led management to raise its full-year consolidated adjusted EBITDA guidance from its previous $495 million to $525 million range to a new range of $655 million to $685 million.
Why the company's momentum can keep going
Homeowners, builders, and remodelers use Louisiana-Pacific's siding and OSB products. Its siding solutions are more environmentally friendly than vinyl, fiber cement, or PVC. Meanwhile, OSB's long march to victory over plywood continues as its cost-effectiveness and more environmentally friendly nature resonate with customers.
Image source: Getty Images.
In addition to the underlying attractiveness of its products and the opportunity to grow by winning market share, Louisiana-Pacific has expanded its relationship with Home Depot to sell more of its siding products in its stores. Furthermore, the recent signing of a strategic nationwide partnership with homebuilder Lennar (another Berkshire Hathaway holding) will add to growth, as will OSB price increases implemented late in the first quarter.
Everything points to Louisiana-Pacific having a great year despite the difficulties of the housing market.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Home Depot, and Lennar. The Motley Fool has a disclosure policy.
