Post by
SleepingGiant64 on Apr 21, 2022 2:57pm
CIBC note today
CIBC took down its target to $42 from $48 but emphasized the value in lumber stocks at current prices. I'm not going to get into the targets because they're based on a drop in housing starts in the next to years to 1.475m in the US in 2024 and a slowdown in reno demand. I just don't see it that way.
Lumber Forecast:
They now see 2022 prices averaging $865. Q2 at $759. (which would put H2 around $665). And $530 in 2023 followed by just $489 in 2024 (which they have as 'mid cycle').
So they've basically written up a worst-case scenario (IMO) and that still puts IFP trading at 6x mid-cycle (I'd argue lower but that's their forecast).
Q1 earnings:
This is basically all this report is good for. They now see Q1 EBITDA at $569m and earnings at $6.65/share.
I was given a hard time here for thinking $7 is possible but once we account for the lower share count, we're almost there.
Lumber price and Q2:
Futures up $50 yesterday and $32 today. Back to $1028 on the May contract. Again, the CIBC Q2 forecast is $759. We're already nearly a third through the quarter and the futures average is around $950, with cash reportedly trading higher.
With that pricing, they have IFP Ebitda at $319 (Q2), $268 (Q3) and $179 (Q4) for $1408 on the year. (what's EV now? $2.0B? after the share repurchase). Then they actually lowered 2023 to $604 from $640 and 2024 to $498 from $520.
EPS forecasts:
Sequentially this year they're at $6.65, $4.59, $3.01, $1.80 for $16.06. Then $5.65 in 2023 and $3.95 in 2024.
Wrong numbers?
Correct me if I'm wrong on this but they have the price at $33.90 and the market cap at $2.064B at that price. I don't think that's right after adjusting for the buyback (I assume 10% is done now). They also have NET debt at 14% of market cap, or around $300m and I don't know how they come up with that at all. I'm guessing that's the EACOM purchase but why take that into account and not the buyback and cash generation in Q1?
Consensus:
Even with all this, the CIBC estimate of $16.06 is still way above the $12.84 consensus this year. That consensus number absolutely has to go up; they could earn $12.84 in the first half of the year.
What I'm watching:
Lumber prices are going to do what they do. I'm obviously a bull. The earnings move in the stock will come down to how well they've managed shipments. They had a bit of extra inventory at the end of Q1 so I'm optimistic but shipping has been tough for everyone.
Ultimately, if housing follows the path CIBC laid out, that's just going to set the stage for more home building and lower rates later.
Comment by
Whynotpeanut10 on Apr 21, 2022 5:37pm
By far one the the best post on this board thsat we have had. Thank you.