Please read the updates below on Boise Cascade (BCC), which reported forth-quarter results yesterday, and Axiall (Axiall), which rescheduled its earnings report.
Wood products company Boise Cascade (BCC) reported fourth quarter 2015 results yesterday, with profits much lower than expected due to product price deflation, much of which was attributed to the strong dollar opening the door to cheaper imports from South America and hampering U.S. exports.
Quarterly revenue rose 6%--higher than Wall Street expected--because demand for wood products remains strong. The housing industry is booming, and Boise’s CEO expects that trend to continue.
Plywood pricing remains weak in the first quarter of 2016, due to exchange rates and oversupply. (There is a new competitor entering the field.) The company is working to increase its plywood margins by reducing log costs as it negotiates new contracts.
Boise Cascade is purchasing two lumber mills, in Alabama and North Carolina. That transaction should close in the first half of 2016. It will provide increased revenues, and freight and operating cost synergies. The company is also making capital improvements in a Louisiana lumber mill, which should add to production in the second half of 2016.
The company has another 1.3 million shares authorized for repurchase, although it was recently barred from enacting stock repurchases due to Federal laws that oversee M&A activity. That holding period is ending, and the company intends to discuss ongoing stock repurchases during its Board meeting next week.
You can read the transcript of yesterday’s earnings conference call here.
Boise Cascade is a large and successful wood products company. When I added it to the Buy Low Opportunities Portfolio, I did so based on aggressive earnings growth projections for 2016 and 2017. Those growth rates currently stand at 50% and 66%, per Wall Street’s consensus earnings estimates. I expect those numbers to be adjusted in the coming days as analysts review 2015 results.
I continue to expect good capital gains from BCC during the next couple of years, in accordance with the projected aggressive earnings growth.
I encourage shareholders to hold their BCC shares through this current downturn in the stock price, in order to benefit from the company’s rising profits in the coming years. Rating: Hold.
Please note that Axiall Corporation’s (AXLL) fourth-quarter earnings report has been rescheduled for Thursday, February 25. It is somewhat unusual for this date to continue changing. I speculate that the reason has to do with the fact that Axiall is currently focused on Westlake Chemical’s hostile buyout offer.