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Monday, Loop Capital maintained a Buy rating on Boise Cascade Company (NYSE:BCC) but reduced the price target to $140 from $145 following the company’s fourth-quarter earnings report. The company, currently trading at an attractive P/E ratio of 10.3x with a healthy EBITDA of $634 million, posted results that exceeded expectations. According to InvestingPro analysis, BCC appears undervalued at current levels, making it particularly interesting for value investors. The strong performance in its building materials distribution (BMD) segment contributed to maintaining the company’s robust financial health score. The positive sales of general line products helped mitigate declines in wood commodity and engineered wood products (EWP).
The company experienced better pricing for Laminated Veneer Lumber (LVL) and I-Joists during the quarter, marking a shift from the downward trend seen over several years. Despite these improvements, Boise Cascade is navigating challenges in the near term. The BMD segment has seen an 8% decrease in average daily sales quarter-to-date, primarily due to unfavorable weather conditions in January. However, InvestingPro data shows the company maintains strong fundamentals with more cash than debt on its balance sheet and a healthy current ratio of 3.34x, suggesting ample liquidity to weather near-term headwinds.
Additionally, Boise Cascade anticipates a mid-single to high-single digit sequential drop in plywood volumes in its wood products business. This is partly due to the ongoing modernization project at its Oakdale, LA plant. Furthermore, the company expects engineered wood product pricing to see a low-single digit sequential decrease in the first quarter of 2025, driven by subdued near-term demand in the residential sector.
Loop Capital analysts believe that EWP pricing will stabilize and potentially increase in the fiscal year 2025, although the timeline for this recovery might be delayed given the current stability in single-family housing starts. Despite the cautious short-term outlook, Boise Cascade is still considered a prime early cycle investment opportunity by Loop Capital. The firm highlights the company’s strong focus on single-family housing, which makes up approximately 80% of its business, and the potential for margin normalization above pre-pandemic levels. Supporting this outlook, InvestingPro data reveals the company offers a substantial 5.46% dividend yield and has delivered strong returns over both five and ten-year periods. InvestingPro subscribers have access to 12 additional key insights about BCC, including detailed analysis of its financial health and growth prospects through comprehensive Pro Research Reports.
In other recent news, Boise Cascade reported its fourth-quarter 2024 earnings with an earnings per share (EPS) of $1.78, slightly surpassing the forecast of $1.77. The company met its revenue expectations, posting $1.6 billion in sales. However, the Wood Products division experienced a 7% decline in sales, while the Building Materials Distribution (BMD) division saw a 4% drop. Despite these declines, Boise Cascade continues to invest heavily in capital expenditures, projecting spending between $220 million and $240 million for 2025.
DA Davidson adjusted Boise Cascade’s stock price target from $155 to $125, while maintaining a Buy rating. The adjustment follows the company’s solid fourth-quarter performance and concerns about the engineered wood products segment’s price stabilization timeline. Analysts from DA Davidson anticipate temporary challenges in early 2025 but expect improved performance later in the year. They noted the company’s net cash balance of approximately $7 per share as a positive factor.
Boise Cascade’s full-year net income for 2024 was $376.4 million, or $9.57 per diluted share. The company forecasts U.S. housing starts to remain flat in 2025, which may impact market dynamics. Boise Cascade’s strategic focus includes expanding its distribution network and investing in engineered wood products, despite potential tariff impacts on Canadian imports that could affect supply chain costs.
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