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On May 30, 2013, we reiterated our long-term recommendation on Plum Creek Timber Company Inc. (PCL - Analyst Report) at Neutral. This is based on the company’s diversified timber and land base and growth prospects due to the rising demand for wood products stemming from a recovery in the residential construction market. However, we believe that the positives have already been factored in, while cut-throat competition remains our concern.

Why Neutral?

Plum Creek reported impressive results for first-quarter 2013. The company’s earnings per share reached 35 cents, comfortably surpassing the Zacks Consensus Estimate of 32 cents and well ahead of the year–ago quarter earnings of 18 cents. The company registered a decent performance across its segments and also recently announced an approximate 5% hike in its quarterly dividend rate.

We believe that Plum Creek’s diversified timber and land base enables it to benefit from large economies of scale. Its deal with Drax and Vulcan Materials Company (VMC - Analyst Report) also augurs well for its top line. It is aiming to raise its non-real estate adjusted EBITDA by $50 million this year and already reported growth of $12 million in the first quarter.

Thus, with solid quarterly results and strong fundamentals, the company is well poised to maintain its growth curves and simultaneously benefit shareholders with steadily rising dividend. Yet, the cyclical nature of the business, cut-throat competition and strict environment policies would limit its long-term growth potential to some extent.

Moreover, following the release of first-quarter 2013 results, over the last 30 days, the Zacks Consensus Estimate for 2013 moved up a cent to $1.39 per share while for 2014, it remained stable at $1.67 per share. Plum Creek currently has a Zacks Rank #3 (Hold).

Other Stocks to Consider

The other two stocks which are performing better and deserve a look are Louisiana-Pacific Corp. (LPX - Snapshot Report) and Weyerhaeuser Co. (WY - Analyst Report), both carrying a Zacks Rank #2 (Buy).
 

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