Louisiana-Pacific (LPX): Is the Market Missing Its Siding Transformation?

Louisiana-Pacific Corporation (NYSE:LPX) is an unusual housing stock. Its results still move with the construction cycle, but increasingly, the more interesting part of the business is what is happening underneath that cycle.

LP makes OSB, or oriented strand board, the engineered wood panels commonly used for walls, roofs, and floors. It also makes engineered-wood siding through its SmartSide brand. The first is largely a commodity business. The second is where LP has been trying to build something more differentiated.

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That distinction matters because the housing market remains difficult. Yet SmartSide has continued to gain share even as construction has weakened. In the second quarter, U.S. single-family housing starts were 18% below their level in the second quarter of 2021. SmartSide volume, however, was 10% higher, while SmartSide revenue was more than 50% higher. Management says the company expects Siding to return to year-over-year volume and revenue growth in the third quarter.

The stock is currently trading at 19.08x forward earnings, which some may feel is high, given the company’s current earnings trajectory. That said, Wall Street Analysts think that the earnings will rebound next year. According to Wall Street analysts, the stock, which has almost halved in value since November 2024, now has some room to increase. The average price target stands at $92.

SmartSide may be the real story

LP’s Siding business is split between primed products and ExpertFinish, its prefinished siding and trim. ExpertFinish is particularly interesting because it can save contractors the time and labor involved in painting siding themselves.

It is also becoming an increasingly important part of the business. In the first quarter, ExpertFinish represented 12% of Siding volume but 18% of Siding revenue. Management said that it was the fastest-growing product line in the Siding portfolio and is spending heavily to increase production. A new Green Bay facility is adding roughly 50 million square feet of annual capacity; another 20 million square feet is planned at Bath, New York. Meanwhile, LP has begun construction of a larger ExpertFinish facility in Minnesota.

That investment is notable because LP isn’t just adding capacity and hoping customers show up. Even though the company’s Q2 revenue fell 12% year-over-year, ExpertFinish volumes grew in the second quarter, and management said the performance increased its confidence in the additional capacity being built.

There is another potential growth avenue that deserves attention. LP says it remains relatively underpenetrated with national homebuilders. It has already secured two new builder partnerships in 2026 and expects to supply about 100 million square feet of SmartSide to 15 of the 25 largest U.S. homebuilders.

If LP can become a more standard choice for large builders, that could make the Siding opportunity considerably larger than simply waiting for housing starts to recover.

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But OSB is still a problem

However, this isn’t a clean turnaround story. Siding revenue fell 4% in the second quarter, while OSB revenue plunged 20% year over year. The OSB decline was driven by lower prices and volumes, and management subsequently announced that it would indefinitely curtail production at its Jasper, Texas facility beginning in October because of weak demand.

In some ways, though, the decision reinforces the broader transformation taking place at LP. The company is pulling back from capacity where economics have deteriorated while directing growth investment toward Siding (which represents roughly two-thirds of the company’s revenue), particularly ExpertFinish.

That doesn’t eliminate the cyclicality of the business. But it could gradually change what investors are buying when they buy LP.

Is there a moat?

Louisiana-Pacific Corporation doesn’t have the kind of moat that a Apple or NVIDIA has. Its products still compete in a highly competitive building-products market.

Its potential advantage is more subtle: product innovation, distribution, brand recognition, and the economics it can offer builders. Over the past 15 years, SmartSide volume has grown at nearly 10% annually, outpacing the roughly 6% growth in single-family housing starts, according to LP management.

The real question is whether LP can keep that edge once competitors respond and the housing market eventually picks up.

The bottom line

There are two very different paths for LP. Weak housing and low OSB prices could continue to drag on earnings. But if Siding keeps gaining share and ExpertFinish becomes a bigger part of the business, LP could come out of the downturn with a stronger and more profitable business mix than it had going in.

Market sentiment

Market sentiment toward Louisiana-Pacific appears to be strengthening. The number of hedge funds holding the stock in Insider Monkey’s database increased from 44 at the end of Q1 to 48 at the end of Q2 2026. Meanwhile, the total value of their positions rose from about $1.49 billion to $1.72 billion.

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This article is originally published at Insider Monkey.