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Norbord (OSB) Upgraded to Strong Buy on Bright Prospects

On Jun 29, Zacks Investment Research upgraded Norbord Inc. OSB to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.

Year to date, Norbord’s shares have yielded nearly 21.70% return, outperforming the gain of 12.06% recorded by the Zacks categorized Building Products Wood industry.

Why the Upgrade?

Market sentiments have been favoring Norbord for quite some time now, especially after it reported impressive first-quarter 2017 results. The company’s share price has increased roughly 3.54% since the results release on May 2. Though the quarter’s earnings came in below the Zacks Consensus Estimate, it surpassed the year-ago tally by 152.2%. The results were primarily driven by healthy demand for oriented strand board (OSB) in North America.

In the quarters ahead, we believe that Norbord will gain from improving housing market conditions in the U.S. Per the consensus forecast from U.S. housing economists, housing starts will likely improve 8% year over year to 1.26 million in 2017. Also, the company is seeing strong product demand from prime customers, better pricing and lower supply chain inventories, which is likely to drive its results in second-quarter 2017.
Also, Norbord is committed toward expanding and modernizing its existing OSB mills. For instance, the company has $135 million investment plan for the development of its Inverness, Scotland OSB mill while is working on a plan for upgrading its Chambord, Quebec OSB mill. Recently, the company secured wood allocation for its Chambord mill.

Moreover, in May 2017, the company tripled its quarterly dividend rate to C$0.30 per share. The revision was primarily driven by its healthy cash flow position and fall in net debt to capitalization ratio.  

Over the last 60 days, the Zacks Consensus Estimate on Norbord increased 79.7% to $1.15 for the second quarter and 20.3% to $3.26 for 2017. Also, the company has an Earnings ESP of +13.50% for 2017. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Norbord Inc. Price and Consensus


Norbord Inc. Price and Consensus | Norbord Inc. Quote

Other Stocks to Consider

Norbord Inc. has a market capitalization of $2.48 billion. Other stocks worth considering in the industry include Boise Cascade, L.L.C. BCC, Potlatch Corporation PCH and Weyerhaeuser Company WY. While Boise Cascade sports a Zacks Rank #1, both Potlatch Corporation and Weyerhaeuser carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade’s financial performance has been impressive, with an average positive earnings surprise of 114.74% for the last four quarters. Also, earnings estimates for 2017 and 2018 have been revised upward, over the last 60 days.

Potlatch Corporation pulled off an average positive earnings surprise of 42.59%. Its earnings estimates for 2017 and 2018 have been revised upward, over the last 60 days.

Weyerhaeuser Company delivered an earnings surprise of 22.22% in the last quarter. Its earnings estimates for 2017 and 2018 have been revised upward, over the last 60 days.

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Weyerhaeuser Company (WY): Free Stock Analysis Report
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Potlatch Corporation (PCH): Free Stock Analysis Report
Norbord Inc. (OSB): Free Stock Analysis Report
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