Interfor is down 15 consecutive trading days and where is Rick Pozzebon, CFO.....just hanging out at Starbucks in downtown Vancouver sipping his latte.
Meanwhile
RBC Dominion Securities analyst Matthew McKellar thinks housing affordability will remain a “constraint” for wood products demand, but he expects stronger lumber prices driven by significant recent permanent curtailments.
“Looking into 2025, we continue to see a good opportunity in containerboard producers International Paper Company and Smurfit WestRock PLC, driven by an ongoing cyclical recovery, improved focus on value over volume, and opportunities to capture efficiency benefits and drive stronger margins,” he said. “We also continue to like the setup for lumber producers (our top ideas: Interfor Corp., West Fraser Timber Co. Ltd., Canfor Corp.) given capacity reductions through the downturn that we think have been significant enough to drive a tighter market in 2025.”
In a 2025 outlook for paper and forest products producers released Friday, Mr. McKellar highlighted three companies as his top Canadian picks for the year ahead.
* Interfor Corp. (
) with an “outperform” rating and $26 target, down from $27. The average on the Street is $25.50.
Analyst: “We expect Interfor to continue pursuing high-return capital projects and further acquisitions over the medium term, although we think delevering is Interfor’s top priority over the near term. We view the company as well-positioned to maximize pricing realizations given its flexible, geographically diversified lumber platform, and we expect additional margin expansion over the longer term as it optimizes its expanded sawmill system. At the same time, NA lumber supply will likely be further constrained due to fiber challenges in BC.”
* Doman Building Materials Group Inc. (
) with an “outperform” rating and $11 target. The average is $11.75.
Analyst: “We think Doman’s business model as a distributor is attractive relative to more commodity-exposed names under our coverage, particularly after the company took steps to reduce its inventory levels. We think Doman can continue to execute on growing in the U.S. over time, including through M&A that helps to expand its scale and geographic reach.”
* Canfor Corp. (
) with an “outperform” rating and $19 target, falling from $21. The average is $21.67.
Analyst: “The company’s geographic diversification into the U.S. South and Europe should benefit its lumber segment, as BC faces a supply and demand imbalance. We anticipate BC to remain a very difficult operating area for the foreseeable future. We think housing fundamentals over the long term remain favourable, which should be beneficial for Canfor.”
He also named Vancouver-based West Fraser Timber Co. Ltd. (
,
) as a top U.S. idea. He has an “outperform” rating and US$117 target for its shares.
“West Fraser Timber Co. Ltd. is the largest producer of both lumber and oriented strand board in the world, and has operations in Canada, the United States, and Europe,” he said. “The company is among the lowest-cost producers of both wood products. It also owns Cariboo Pulp & Paper and has a 50-per-cent interest in Alberta Newsprint. We expect that, over time, West Fraser will benefit from exposure to growing end-markets.”
Mr. McKellar also cut his target for Canfor Pulp Products Inc. (
, “sector perform”) to $1 from $125 and raised his target for Cascades Inc. (
, “sector perform”) to $13 from $12. The averages are $1.50 and $12.50, respectively.