West Fraser Earnings: Weak Housing Markets Weigh Heavily on Wood Product Demand

West Fraser reported third-quarter results that came with few surprises as the company continues to navigate softening lumber demand and lower prices. Net sales declined over 18% year over year as all four primary segments posted declines, with the pulp and paper business faring worst in the group. Wood product markets have experienced little respite from housing market pressures as lower housing starts and higher interest rates constrain wood product demand. That said, the strength in West Fraser’s North America EWP business led to a $185 million consolidated operating profit, the first quarterly profit for the company in a year. Nevertheless, we've decreased our fair value estimate for New York Stock Exchange to $89 from $92 due to lower near-term revenue in our forecast but increased our fair value estimate for Toronto Stock Exchange-listed shares to CAD 123 from CAD 121 per share due to an increase in the USD/CAD exchange rate.