TRG | The Bottom Line – 3/1

TRG is doing double-header marketing this upcoming week with the management teams of two of our favorite companies/ideas – Louisiana Pacific (LPX) in Boston and WillScot Mobile Mini (WSC) in NYC. The days are filled up and investor interest is quite apparent, as both companies have compelling stories and upside. LP and WSC have unique similarities and differences that make them attractive stories and stocks (we see meaningful upside to both). These are timely junctures to get interested in these names, as LP’s Siding segment is returning to growth this year and WSC announced the acquisition of McGrath RentCorp. (MGRC) and in conjunction with the announcement, raised its margin targets. Points of comparison: They both are high-quality companies with sizable market share, who are well-positioned to gain more share and increase FCF. Both companies have meaningful multi-year margin expansion opportunity (LP Siding guide of ~20% in FY’24, long-term for 25% / WSC guiding to ~45% in FY’24, multi-year target of 45-50%). Also, both companies have effectively divested non-core units and deployed excess capital in prior years (LP through expanded capacity and significant share repurchases / WSC through bolt-ons and share repurchases). Key point of contrast: LPX is focused on organic share gain through growing volumes. WSC has organic opportunity for volume growth, but the company has meaningful revenue growth opportunity from pricing rolling through (reported price lags spot pricing, supplemented with value-add products). For WSC, the acquisition of MGRC brings a large opportunity for margin enhancement, a more effective network, and closed-gate opportunity to grow value-add products across the MGRC base.