RE:CIBC UpgradeMore details. GLTA
As affordability improves,” CIBC World Markets analyst Hamir Patel upgraded a trio of lumber stocks on Thursday.
“With housing affordability improving and a significant removal of B.C. lumber industry capacity from Canfor, we are upgrading the three major lumber companies (Canfor, Interfor and West Fraser) to Outperformer (from Neutral),” he said. “When we moved to the sidelines on the group on Oct. 3, 2022, we pointed to significant downside risk to estimates. Since then, mortgage rates have pulled back 65 basis points to 6.18 per cent (after peaking at 7.37 per cent in mid October); consensus EBITDA estimates on CFP/IFP/WFG for 2023 have subsequently declined by 45 per cent; and the Canadian LumberCos have underperformed the TSX Composite by an average of 7 per cent. While we still believe sell-side consensus estimates are overly optimistic for 2023/24 (we are 40 per cent/20 per cent below the Street), we expect the improving housing affordability narrative and B.C. supply shuts to drive the stocks higher.”