West Fraser Earnings: Near-Term Headwinds Mount Amid Lower Lumber Prices and Tepid Demand

No-moat-rated West Fraser reported second-quarter results that were largely in line with our expectations. Revenue decreased roughly 44% year over year as all four primary segments saw substantial double-digit declines. Wood product markets continue to face a challenging operating environment in North America as higher interest rates and persistent inflation weigh on lumber demand. Additionally, lumber prices have remained well below pandemic-era highs and have shown few signs of improvement through the first half of the year. Nevertheless, we are maintaining our fair value estimate for New York Stock Exchange listed shares of $92 but decreasing our fair value estimate of Toronto Stock Exchange-listed shares to CAD 121 from CAD 125 per share due to a decrease in the USD/CAD exchange rate.