The price of lumber has been rallying in the United States since the start of the COVID-19 pandemic. Between November 2021 and January 2022, lumber prices doubled to beyond the $1,000 per thousand board feet mark. This has occurred in varying degrees because of flooding in…
British Columbia that caused supply chain disruptions and an increase in tariffs on Canadian lumber imports.
As of February 10, lumber prices had risen nearly 30% for the month, consistent with a broader rally in global commodities as economies reopen. Furthermore, the weakening U.S. dollar is heightening price pressures. Lumber prices are expected to trade at $1,017.47 per thousand board feet by the end of this quarter, rising to $1,427.98 in 12 months.
Given this backdrop, we think lumber stocks West Fraser Timber Co. Ltd. (WFG – Get Rating), Boise Cascade Company (BCC – Get Rating), and Canfor Corporation (CFPZF – Get Rating) might be ideal investments.
West Fraser Timber Co. Ltd. (WFG – Get Rating)
WFG is a diversified wood products company that produces and sells lumber, panel, pulp, and paper in Western Canada and the southern United States. The company’s offerings include spruce-pine-fir, Douglas Fir-Larch, treated wood products, and bioproducts. It is based in Vancouver, Canada.
On December 7, WFG declared a quarterly dividend of $0.20 per share on its common shares and Class B common shares, which was payable on Jan. 11, 2022. This reflects upon the company’s cash generation ability.
On December 6, WFG completed the acquisition of an oriented strand board (OSB) mill near Allendale, South Carolina. Earlier, on December 1, the company announced that it would proceed with closing its acquisition of the Angelina Forest Products lumber mill located in Lufkin, Texas. Both the acquisitions might add to WFG’s operative capability.
For its fiscal third quarter, ended September 30, WFG’s sales increased 86% year-over-year to $2.36 billion. Its operating earnings rose 72.1% from the prior-year quarter to $630 million. Its earnings and EPS improved 75.6% and 9.9%, respectively, from the same period in the prior year to $460 million and $4.20.
Analysts expect WFG’s EPS to come in at $6.55 for its fiscal quarter ending March 2022. Furthermore, WFG has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 31.6% in price over the past year and 33% over the past six months to close yesterday’s trading session at $97.88.
WFG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
WFG has a Quality grade of A and a Momentum grade of B. In the six-stock Industrial – Wood industry, it is ranked #3. The industry is rated A. Click here to see the additional POWR Ratings for WFG (Growth, Value, Stability, and Sentiment).
Boise Cascade Company (BCC – Get Rating)
BCC in Boise, Idaho, operates as a manufacturer of wood products and distributor of building materials in the United States and Canada. The company operates through the Wood Products and Building Material Distribution segments.
On February 7, BCC declared a quarterly dividend of…
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