Wood products makers downgraded due to lower housing demand and lower lumber prices


Shares of Boise Cascade Co. BCC,
fell 10.9% to an eight-month low, and Louisiana-Pacific Corp. LPX,
slid 4.9% to a 15-month low, after BofA Securities downgraded wood products makers to buying neutral, citing a “more bearish” view of new housing demand and lumber prices have fallen sharply. Analysts George Staphos and John Babcock also cut their price targets on Boise shares to $71 from $95 and Louisiana-Pacific to $67 from $90. The downgrades come after BofA Securities recently cut its 2023 estimate for U.S. single-family housing starts (which use three times as much lumber as multi-family housing) to 800,000-900,000 from the current rate of about 1.1 million, given short-term demand risks. as rising prices and interest rates have resulted in the lowest levels of affordability in about 16 years. The latest housing starts data showed a plunge to a two-year low in May. In addition, analysts said the reasons for optimism, namely such strong earnings resulting from above-average lumber prices, increased spending on new home construction and repair/renovation and tighter transport supply chains, have already “played a big role”. And LB00 timber futures,
fell 47.7% year-to-date, while the S&P Goldman Sachs Commodity Index rose 32.2%. Boise shares have fallen 21.9% this year and Louisiana-Pacific shares have lost 35.2%, while the S&P 500 SPX,
lost 21.1%.


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