(By Balachander) BMO Capital Markets upgraded its rating on shares of Norbord Inc. (TSE: NBD), a producer of wood-based panels, to "Market Perform" from "Underperform" and raised its 12-month price target to $23.50 from $15.
"We are impressed with the producer discipline in a fragmented market. We expect continued growth in demand," the brokerage wrote in a note.
Norbord reported diluted EPS of $0.61 compared with the First Call mean of $0.58 and BMO forecast of $0.46. EBITDA was $66 million: European operations, $10 million; and North America, $58 million less Corporate charges of $2 million.
The outperformance was primarily owing to higher-than-expected panel sales. Including idled mills, the North American operating rate was 70 percent, BMO said.
For Q4, the company expects another strong quarter in North America but pointed to some softening in Europe. The South-West OSB Q3/12 selling price averaged US$293/000 sf, up $68/000 sf from Q2/12.
BMO's South-West OSB panel price forecast for 2012 is $242/000 sf and for 2013, $230/000 sf, up $15/000 sf from its prior forecast. Norbord EPS sensitivity to a $20/000 sf OSB panel price change is $1.40/share.
Shares added 2.04 percent to trade at $20.99 on Tuesday on the Toronto Stock Exchange.