Piper Jaffray Worried about Lumber and Housing Data (APOG, BECN, POOL, ASTE)

Piper Jaffray is out with an analyst note this morning, where they express concern about the recent negative housing data and lumber weakness. They said, “While the fall off in residential permits and starts post tax credit was expected, some of the data has been weaker than expected as housing related stocks have sold off in the past few days. Seasonally adjusted SF units under construction had appeared to bottom in Dec/Jan, showing progress each month since. The May report reversed all of the previous progress as SF units fell below February's 304K seasonally adjusted total.” “While we continue to see potential for very modest y/y residential construction improvement, we are increasingly cautious about the degree of progress as lumber shipments during the most recent week fell to levels not seen since the early weeks of CY10, suggesting the June housing report may be similarly weak. Cumulative lumber shipments pulled back to ~12% above CY09 and we now believe cumulative shipments could likely pull back to single digits above CY09 in the absence of the credit as a catalyst.” They also noted, “Sand/gravel shipments remained solidly above (~17%) CY09 comps with continued cumulative shipment improvement (5% y/y). Metal products continue to serve as a proxy for the robust recovery in manufacturing as cumulative shipments reached 64% growth y/y and weekly shipments continue to be far above cumulative levels with week 23 shipments up ~89% y/y. Industrial Production and Capacity Utilization also continued to improve from their recession lows of mid CY09 in May, as indicators continue to support our view of a strengthening domestic manufacturing sector.” Piper analysts closed by saying, “Improving y/y Sand & Gravel shipments increasingly point to significant road paving activity, with Astec Industries ASTE benefiting. We continue to believe demand for Apogee Enterprises’ glass APOG will remain constrained over an extended period. We see very modest y/y revenue growth associated with residential construction for Beacon Roofing Supply BECN) and Pool Corporation POOL as conditions appear only marginally better than last year. On the manufacturing side, strong metal shipments support a gradually strengthening domestic manufacturing environment that should help support demand for our manufacturing sector coverage names.”