The already-struggling shares of Noranda Aluminum Holding were being crushed Monday after a Citi analyst cut his rating and price target on the stock and investors took down most things related to commodities on fears that global growth is again slowing. Citi analyst Brian Yu lowered his opinion of Noranda to 'neutral' from 'buy' and now has a price target of $4.50, down from $7. At about 2:20 p.m., Noranda shares (Ticker: NOR) were off more than 8 percent to about $3.60.
On a related note, Delek US Holdings (Ticker: DK) were down 7 percent as investors also sold off oil refiners, many of which have run up big time so far this year.
Louisiana-Pacific shares also were giving up a significant ground Monday after a National Association of Home Builders/Wells Fargo index showed that home builders' optimism fell this month to its lowest level since October. In addition to complaints about material costs and getting the loans they need to build, builders are now showing some concern about consumer demand, the report said. That stung LP (Ticker: LPX) to the tune of almost 9 percent on volume that will more than triple the stock's daily average.
Kathryn Thompson of locally based Thompson Research Group was a guest Monday on the Bloomberg Surveillance radio show where she discussed trends affecting the construction sector. Some of the big ones, she said, are the pricing power building products manufacturers now have — something Louisiana-Pacific has benefited from — and emerging signs of shortages both in materials and labor. But the market isn't overcooking like 2006, she added, in part because of greater regulation and the reach of the booming energy sector into other parts of the economy.
Thompson, whose team is headquartered in the 2525 West End Building, also spoke about the Nashville market for a bit and answered one of the big cocktail party questions of the moment. The apartment building boom the area has seen in recent years will end in the next 18 months or so.
"We're in a cycle and I think that we're 50 to 60 percent or more through that cycle," she said. "That will taper off, particularly as home prices continue to march up."
D.A. Davidson analyst Steve Chercover has taken "the uncomfortable step" of cutting his rating on shares of Louisiana-Pacific to 'underperform' from 'neutral' despite raising his profit estimates and price target. Chercover says the extreme bullishness surrounding LP and other players in the housing market has gone a little too far. LP shares (Ticker: LPX) are off about 2 percent in morning trading.
Mike Underhill, manager of the recently launched Capital Innovations Global Infrastructure, Timber and Agribusiness Fund, tells viewers of TheStreet.com that Louisiana-Pacific is one of his favorite holdings because "longer term, it's a thematic China play." The Nashville-based company, he says, is poised to get a boost from the big growth in the ongoing construction boom in the Middle Kingdom. Rebuilding from Superstorm Sandy also will provide a boost in 2013 and beyond. Shares of LP (Ticker: LPX) are up 130 percent in 2012 and are now at their highest level since October of 2007.
Logan's Roadhouse executives expect that their commodity costs will rise between 3 percent and 5 percent in their fiscal 2013, which kicked off Aug. 1. That's less than the increase their peers at Cracker Barrel fear but still an important issue. It's also probably more than Logan's CEO Tom Vogel and his team will be able to hike prices given that customer traffic fell almost 5 percent in fiscal 2012.
The Cracker Barrel Old Country Store team isn't expecting to get a break in 2013 when it comes to commodity inflation. The cost of beef and other basics has been climbing steadily in recent years, and now there's concern that this summer's drought will add fuel to the fire. In their newly filed annual report, Cracker Barrel brass say they expect to face food commodity inflation between 5 and 6 percent in the coming year.
One potential source of comfort: A year ago, Cracker Barrel execs forecast that inflation in 2012 would be almost 6 percent. It came in 4.5 percent.
Chris O'Cull at KeyBanc Capital Markets says food cost inflation at Cracker Barrel is likely to be at the high end of the company's range, which will cut into earnings growth. He has trimmed his EPS target for 2012 and lowered his rating to 'hold' from 'buy.' That has Cracker Barrel shares (Ticker: CBRL) giving up almost 3 percent. Year to date, they've risen about 25 percent.
Over in California, Attorney General Kamala Harris has begun investigating whether the increasingly tight ties between doctors and hospitals might be driving up the price of care. But Gary Lieberman at Wells Fargo doesn't see a threat to the prices of hospital stocks, including those of HCA Holdings and Community Health Systems. He continues to rate both at 'outperform.' Investors also seem unperturbed and are bidding up hospital company shares big time today, pushing LifePoint to its highest level in almost seven years and HCA and CHS to 14-month and 16-month highs, respectively.