Wood products name Boise Cascade (BCC) has started to appear on some of my deeper value screens, so it is time to take a gander.
The company produces engineered wood products and plywood, among other building products, so given the state of the economy and current/expected housing, the natural inclination is to avoid it like the plague. The real question is whether much of the negativity is already priced into the stock.
The company has been on a roll, at least in terms of positive earnings surprises, with a run of six straight. For the most recently reported quarter, reported early last month, BCC reported earnings per share of $5.49, 70 cents ahead of the consensus, while revenue of $2.28 billion was $120 million ahead of estimates. The balance sheet is solid, BCC ended that quarter with over $588 million, or nearly $15/share in net cash ($1.033 billion in cash, $445 million in debt). Shares currently trade at just 2.23x net current asset value (NCAV) and 1.36x book value.
Consensus estimates for 2023 ($8.83) and 2024 ($7.75) imply forward price earnings ratios of just under 7, and 7.5. Earnings will likely be down big from 2022 ($20.01 estimate), but that decline seems to already be priced in. This however is the poster-child case of why not to pay too much attention to trailing earnings. The company's trailing price earnings ratio is just 3, but is meaningless given the expected decline in forward earnings.
BCC pays a small regular quarterly dividend of 12 cents/share which equates to a .8% yield, but that does not tell the whole story in terms of the company's propensity of returning cash to shareholders. BCC also pays out "supplemental" dividends from time to time, including $2.50 in May, and $3 last November. That's nearly $6 in distributions over the past year, and on a trailing basis, represents a 10% yield. You certainly can't assume that the coming year will be similar in terms of distributions, but the company has paid out special dividends since 2017, normally one/year, with the exception of 2021 when it paid two.
If nothing else, this is a potentially interesting story, of a company with cyclical earnings, that has just come through a boom in revenue and profits. It will see a slowdown in the coming years, but just might be priced accordingly. The next "progress report" for BCC will be Q3 earnings, with an expected release date of 10/31.