Back to top

Analyst Blog

We recently downgraded Weyerhaeuser Company (WY - Analyst Report) from Outperform to a Neutral recommendation, anticipating that the company will perform in line with the broader market.

Why the Downgrade?

Weyerhaeuser is a well renowned forest products company with a huge timberland asset. It serves a diverse clientele spread across the U.S., Canada, Japan, Europe, and other regions. The company currently provides a solid year-to-date return of 33%.  

Over time, the company has solidified its timberland assets and is all set to further expand with the addition of Longview Timber LLC to its portfolio. The company’s total ownership of the U.S. timberlands post the acquisition will likely reach 6.6 million acres.  

Also, serious efforts are being made to improve operating efficiencies and reduce costs. To meet the end, non-performing assets are being disposed of to free resources for more productive use. Weyerhaeuser anticipates generating sequentially higher earnings from disposition of non-strategic timberlands in the second quarter. Of late, the company has initiated search for suitable alternatives for its homebuilding and real estate company, WRECO.

Apart from these, the recent increase of 18% in quarterly dividend rate points toward the company’s healthy balance sheet and strong cash position. For 2013, management looks forward to better operating conditions as demand from major export destinations are expected to surge.

Despite all these positives, we have downgraded the recommendation on Weyerhaeuser to Neutral, presuming that these positives have already been discounted in the share price. This leaves little room for further expansion. Further, risks arising from stiff competition, exposure to currency translation and geopolitical issues cannot be completely ignored.

Other Stocks to Consider:

Weyerhaeuser currently has a market capitalization of $15.7 billion. Other stocks to watch out for in the industry are Louisiana-Pacific Corp. (LPX - Snapshot Report), Potlatch Corporation (PCH - Snapshot Report) and Rayonier Inc. (RYN - Snapshot Report).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%