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    Boise Cascade Co (BCC)

    Q3 2024 Earnings Summary

    Reported on Feb 25, 2025 (After Market Close)
    Pre-Earnings Price$138.49Last close (Nov 5, 2024)
    Post-Earnings Price$142.80Open (Nov 6, 2024)
    Price Change
    $4.31(+3.11%)

    What went well

    • Boise Cascade is well-positioned to benefit from a shift back towards I-joists in floor systems as builders focus on reducing cycle times and seek speed and simplicity on the job site. I-joist EWP represents that, and the company feels good about that environment.
    • The company's general line sales continue to hold up well, driven by purposeful strategies such as acquisitions (e.g., BROSCO) and start-ups in various locations, as well as suppliers adding new SKUs, which supports Boise Cascade's two-step distribution model.
    • Boise Cascade is committed to returning capital to shareholders through share repurchases and special dividends, while continuing to invest in organic growth projects and maintaining flexibility for M&A opportunities that align with their strategy.

    What went wrong

    • Customers are proceeding cautiously, with dealers advising to "proceed very cautiously" due to market conditions and upcoming seasonality, potentially impacting demand negatively. ( )
    • The company expects seasonally lower volumes and anticipates that the daily sales pace will erode further in November and December, which may lead to decreased revenues. ( )
    • Uncertainty in commodity prices and energy costs could result in margin pressures in the coming months, as recent commodity price increases are viewed as supply-driven rather than demand-driven, adding unpredictability to future performance. ( )

    Q&A Summary

    1. Capital Allocation and Share Buybacks
      Q: How are you thinking about capital allocation and shareholder returns?
      A: We have significant capital spending ahead for organic growth and facility replacements, particularly in the Southeast. We remain flexible for M&A opportunities if they make sense. Alongside our quarterly dividend, we've executed special dividends, including a $5 per share special dividend in September. We also repurchased shares in the third quarter and plan to continue being opportunistic with buybacks , though we won't specify amounts.

    2. EWP Pricing and Margins
      Q: Will rising lumber prices affect EWP pricing and margins?
      A: EWP pricing isn't strongly correlated with lumber prices. Instead, it's driven by demand, operating rates, and particularly single-family starts. While we've seen some pricing declines in EWP and weak plywood pricing, we feel good about our operating posture and execution. We focus on total Wood Products EBITDA margin rather than specific EWP margins due to our integrated operations.

    3. Oakdale Plant Modernization
      Q: What's the timeline for the Oakdale plant modernization, and can you offset capacity loss?
      A: We're starting demolition of two dryers this week and will operate at about 50% capacity in Q4. The plant will be down during Q1 and restart in Q2. We've accumulated veneers and prepared other facilities to ensure no impact on inventory available to customers. We're well prepared going into this modernization.

    4. Growth in General Line Sales
      Q: Can general line sales become 50% of revenue over time?
      A: We're seeing increased SKU intensity as vendor partners expand their product offerings. This supports two-step distribution and plays to our strengths. General line sales, including our door and millwork segment, represent a significant growth opportunity. We aim to continue growing this segment as we have over the past couple of years.

    5. Inventory Management Strategy
      Q: How are you balancing inventories amid pricing headwinds and potential demand?
      A: It's a balancing act. We're in a distribution-friendly market and need to serve customers with the right inventory levels. Despite seasonal slowdowns, we're erring on the side of having inventory to serve our customers.

    6. BMD Activity Levels and Outlook
      Q: How do you see Q4 activity levels in EWP and BMD?
      A: October was strong with 23 sales days, but we expect volumes to come down in November and December due to fewer sales days and uncertainties like mortgage rates. EWP volumes are expected to trend down, aligning with single-family starts. The market is volatile, so we're focusing on being able to pivot quickly to respond to changes.

    7. Performance of BROSCO Acquisition
      Q: How is the BROSCO business performing?
      A: The BROSCO business has been rock solid, performing even better than expected.

    8. EWP Operating Rates
      Q: What were your EWP operating rates in Q3?
      A: Our operating rates were around 80% in the third quarter , with volumes fairly consistent with the second quarter.

    9. Customer Demand and Sentiment
      Q: What are you hearing from customers regarding demand and inventory levels?
      A: Dealers are cautious. While we've had tailwinds in the commodity market recently, with seasonality coming in, customers are expected to lean more on distribution. It's becoming a distribution-friendly market.

    10. Shift Towards I-Joists
      Q: Are you seeing a shift back to I-joists over floor trusses?
      A: Builders are focusing on reducing cycle times and seeking speed and simplicity on the job site. I-joists provide that advantage over plated floor trusses. We feel positive about this environment and think it could be favorable for us.

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