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Bull of the Day

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With strong revenue growth potential and excellent cost management, Weyerhaeuser seems to be in a position to deliver another positive surprise when it reports its earnings on Friday.

Further, with a solid outlook for the industry, this Zacks Rank #1 (Strong Buy) stock looks very attractive as of now.

About the Company

Structured as a REIT, Weyerhaeuser is one of the world's largest private owners of timberlands, with more than 6 million acres of timberlands primarily in the U.S., and another 14 million acres under management in Canada.

Weyerhaeuser is also one of the largest manufacturers of wood and cellulose fibers products. They also develop real estate, primarily as a builder of single-family homes.

Improving Fundamentals and Increasing Dividends

The company has been focused on improving its capital structure with strong liquidity and reduced interest expenses. Further with housing recovery underway, continued operational excellence and excellent cost management, WY is positioned for strong revenue growth and is expected to grow its dividend over time.

On April 11, 2013, Weyerhaeuser announced its quarterly dividend of $0.20 per share, up 18% from earlier quarterly dividend of $0.17 per share. The company has grown its dividend by more than 33% since declaring its initial dividend as a REIT.

Positive Earnings Estimates Revisions

As a result of improving outlook for the company, analysts have been revising their estimates for the March 2013 quarter and the fiscal year 2013. Zacks consensus estimates for the first quarter and the fiscal year 2013 now stand at $0.22 and $1.08 per share, respectively, up from $0.19 and $0.97 per share, 60 days ago.

The company will report it first quarter earnings on April 26, 2013.

Solid Industry Outlook

With a Zacks Industry Rank of 2 out of 265, Building Products/Wood industry is expected to outperform significantly in the near-to-mid term.

Better Play on Housing Recovery?

As a result of improving sentiment, home construction companies and homebuilder ETFs have been on the run in the past few months and some of them already look quite expensive.

From valuation perspective, timber industry looks quite attractive now. Continued pickup in the housing construction and remodeling activities will result in increased demand for wood.

Further, most timber companies deferred their harvest when the demand for wood was low while their assets (trees) continued to grow and so as the housing market returns, the cash flows from harvest operations will increase in a big way.

Lumber prices have been soaring of late and will continue to benefit timber companies.

The Bottom Line

WY is a Zacks Rank#1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform”. Additionally, a Zacks Industry rank of 2 out of 265 indicates very strong likelihood of continued strength in the short to medium term, compared to other industries.

Further with a dividend yield of 2.7%, excellent fundaments and a solid growth potential, I believe that this stock will be a nice addition to any portfolio.

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