Taking stock: S&P frets about LP dividend

Updated with conference-call comments from LP CEO Rick Frost

05-06-2008 3:25 PM — There were few positives to note in Louisiana-Pacific’s recent earnings, but S&P Equity Research analyst Stuart Benway says that, with little prospect for an industry turnaround, there could be more bad news ahead for LP investors.

Following up on the company’s 45-cent-per-share loss, Benway writes that, despite stabilizing prices for LP’s bread-and-butter oriented strand board products, his team does not see demand returning in the coming year.

As a result, he sees a 40-cent loss next year on top of this year’s $1.30 estimate – numbers that could necessitate another cost-cutting move.

“We are becoming concerned that the dividend could be reduced or eliminated before year end,” he wrote.

That’s quite a turnaround from just six weeks ago, when Benway wrote that LP “has the financial strength to endure through this extended downturn.”

Dropping its dividend altogether would save LP about $61 million per year. The company finished the first quarter with $414 million in cash, equivalents and short-term investments, down from $532 million at the end of 2007.

During LP's conference call Tuesday, CEO Rick Frost broached the topic, saying "the strength of our balance sheet must be protected in a prolonged down cycle and we are becoming increasingly conservative in our expenditures... I don't think it's out of the question that the dividend could possibly be reduced or suspended until we regain profitability."

LP shares (Ticker: LPX) ended regular trading at $11.12, down 1.7 percent on the day. They’re down 44 percent over the past year.

Still selling Cracker Barrel

Elsewhere at S&P, Mark Basham still isn’t high on CBRL Group, the parent of Cracker Barrel, as it battles tough spending headwinds.

Reacting to CBRL’s April sales numbers released this morning, Basham says high gas prices are changing consumers’ dining behavior. As a result, he’s keeping his rating at ‘sell’ and his price target at $31, but he’s lowering his 2008 estimates by 5 cents to $2.80.

Shares of CBRL (Ticker: CBRL) ended Tuesday trading at $35.20, down more than 4 percent on the day. Year to date, they’re up about 9 percent.

Earlier this year, Basham downgraded CBRL to ‘sell,’ saying its margins and cash flows were deteriorating.

Higher target at Tennessee Commerce

Tennessee Commerce Bancorp’s success in managing asset quality – nonperforming assets came in at 0.93 percent of total loans last quarter – has caused investment firm Sterne Agee to nudge up its price target for the Franklin bank.

Analysts at Sterne Agee are now looking for the stock (Ticker: TNCC) to go to $21 in the next year, up from $20. At the same time, though, they have trimmed their 2008 EPS estimate from $1.61 to $1.58, citing lower interest margins.

Tennessee Commerce shares closed down almost 4 percent this afternoon at $17.63 and are down almost 30 percent so far this year.

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