By Sam Boughedda
A BofA analyst downgraded shares of forest/paper stocks Weyerhaeuser (NYSE:) to Neutral and Louisiana-Pacific (NYSE:) to Underperform in a note to clients on Tuesday.
Weyerhaeuser’s price target was lowered to $34 from $38 per share, while Louisiana-Pacific’s price target was cut to $56 from $64 per share.
The analyst explained that due to the firm’s housing and building products views, they decided to lower their operating rate and pricing forecasts across key wood products.
“At this juncture, operating rates in 2023 look like they’ll pierce 80%, prompting more downward pricing pressure on the sector’s products,” wrote the analyst. Recognizing that, as one of our industry contacts always says, supply/demand models are merely illustrations and not precise forecasts, we nonetheless lower forecasts and POs.”
The analyst said the firm’s LPX and WY calls are not driven by a super-new insight but rather their “ratings distribution, upside to POs, and below-consensus estimates.” He added that they “believe it will be difficult to see outperformance given these factors and a looming recession.”
LPX and WY shares are down over 5% on Tuesday at the time of writing.