Shift To Higher-Margin EWP Products Pays Off For Boise Cascade: Bullish Analyst

Truist Securities analyst Michael Roxland reiterated a Buy rating on Boise Cascade, L.L.C. BCC, raising the price target to $129 from $100.

The company recently reported Q2 results, where sales slumped 20% Y/Y.

However, the analyst applauded BCC's strong margin performance in Q2 in Wood Products and Building Materials Distribution.

BCC has shifted its product mix to EWP, a higher-margin product with more stable pricing than traditional commodity wood products, Roxland adds. 

Given an improving single-family housing market and homebuilder focus on reducing cycle times, EWP demand improved, particularly in the West, due to improving weather and construction activity, resulting in an overall EWP operating rate of ~80% versus ~60% earlier in the year, notes the analyst. 

In 3Q, BCC expects EWP prices to decline modestly. The analyst senses that the company is tactically lowering costs on some products in some geographies to remain competitive. However, in aggregate, the EWP prices are expected to stay well above pre-COVID levels.

The analyst raised estimates given the beat and strong margin performance in both Wood Product and BMD. 

Overall, for 2023, Roxland raised the EPS estimate to $12.52 (from $8.70).

For 2024, the analyst raised the EPS estimate to $10.50 (from $8.10).

For 2025, the analyst raised the EPS estimate to $10.70 (from $8.50).

Price Action: BCC shares are trading higher by 1.43% to $108.30 on the last check Wednesday.