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Softer demand for OSB wood panels could hurt Ainsworth stock performance: RBC

TORONTO – RBC Capital Markets has lowered its expectations for Ainsworth Lumber Co. Ltd. (TSX:ANS) in its preview of North American lumber producers ahead of the sector’s third-quarter financial reports.

RBC says the lowered expectations for Ainsworth reflects the bank’s outlook on oriented-strand board prices amid a slower recovery of U.S. home construction than previously anticipated.

The bank lowered its rating for Vancouver-based Ainsworth to “sector perform” and reduced its target price for Ainsworth shares by 50 cents to $2.75, which is still above Thursday’s closing stock price at the Toronto Stock Exchange.

RBC said its estimates for Ainsworth are lower than the general consensus but that other estimates could move lower over the coming weeks.

It also lowered price targets for Toronto-based Norbord Inc. (TSX:NBD), another OSB producer, to $24 (from $25) and Montreal-based paper producer Domtar Inc. (TSX:UFS) to $50 (from $54).

Other Canadian companies in the sector fared better in the RBC preview of third-quarter earnings. The price target for Canfor Corp. (TSX:CFP) was increased to $30 (from $27), Interfor Corp. (TSX:IFP) was raised to $20 (from $19), and West Fraser Timber (TSX:WFT) to $65 (from $60). All three are Vancouver-based lumber producers.

RBC said it has raised its estimates for a benchmark softwood lumber for this year to $350 per thousand board feet, from $340, and its 2015 and 2016 price forecasts by $10 each to $375 and $425 respectively.