One of Canada’s biggest exports to the United States is lumber. A lot of American buildings have a certain amount of Canadian plywood and other materials as part of their makeup. But that Canadian lumber has made for some friction between Canada and the United States, and Canada is now willing to talk about setting some limits to keep trade tensions down. The news was not welcome for lumber maker West Fraser Timber (TSE:WFG) and its shareholders, as shares slid nearly 1.5% in Wednesday morning’s trading.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
Word from David Eby, Premier of British Columbia, was that Canada is willing to talk about limits on softwood lumber exports to the United States. The American coalition, Eby noted in an interview with Bloomberg News, has been routinely asking for a “quota” of Canadian softwood lumber hitting the United States market.
The Canadian side has routinely resisted these efforts, and with good reason. The lumber trade is substantial, so why would Canada voluntarily limit the amount of that market it can get its hands on? But now, with a trade war on, Canada is a bit more willing to talk. That comes at a good time for American lumber mills; said mills have added fully eight billion board feet of production capacity since 2016, and if Canada backs off on exporting, more of that production can hit American markets. For West Fraser Timber, however, the story is much different.
Still Renewable
Yet even as West Fraser Timber faces a potential punch in the market share, there are still those who praise its position in the field. A recent report referred to West Fraser Timber as “…a resilient player in the wood products sector.” Ahead of its earnings report release next week, some point out that West Fraser has already put substantial focus on “…sustainable forestry practices and product diversification….”
That combination of factors is likely to give West Fraser a leg up. Certainly, a quota on Canadian exports to the United States would be a problem for West Fraser, but if it could open up other markets—in much the same way the Canadian liquefied natural gas (LNG) market is looking to open up Asia—the loss of some of the United States market could be replaced by other buyers.
Is West Fraser Timber Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:WFG stock based on six Buys assigned in the past three months, as indicated by the graphic below. After a 0.42% loss in its share price over the past year, the average TSE:WFG price target of C$131.28 per share implies 31.38% upside potential.
