TRG | The Bottom Line – 5/9

This week Louisiana Pacific (LPX) reported solid Q1’25 results and raised its FY’25 Siding outlook – the only company in TRG’s building products coverage to do that this earnings season. The updated FY guidance assumes tariffs are a $12MM headwind to EBITDA, but LP still increased the midpoint of Siding EBITDA by $10MM. The day of earnings, LP stock moved up 3-4% amidst a sea of red in the wider building products sector (on May 6th). In TRG’s view, the quarterly results and outlook align with our view that LP is the rare share-gainer in the building products industry and that the runway ahead is immense. LP’s Siding saw strength across the board, with broad-based strength in R&R, SF new construction, and sheds. The only relative weakness was in home centers, which had solid sell-through but offset somewhat by inventory reduction. Consider that Siding’s Q1 growth in both sales (11%) and volume (9%) was impressive on a comp basis (Q1’24 sales and volume up 9% and 4%, respectively) and against SF starts down 5% in Q1 and big-ticket R&R staying sluggish. To hammer the point home – ExpertFinish grew faster than the segment. OSB has negative colliding forces in 2025 (peers adding capacity last year and lower SF starts this year), but is a positive force for value creation over time. LP emphasized their conviction in the value of this segment to the business over time, both for its free cash flow and the conversion of these facilities for Siding over time. Also, given OSB is used in SF new construction, LP believes this pairs nicely as a go-to market to win Siding business with homebuilders.