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Timber real estate investment trust (REIT) Plum Creek Timber Company Inc. (PCL - Analyst Report) will issue its third-quarter 2013 results tomorrow, Oct 28, after the market close.

In the last quarter, it delivered a positive earnings surprise of about 21.74% backed by the rising demand for wood products stemming from the residential construction market recovery. The company registered a decent performance across its segments. However, the question is - Will Plum Creek be able to keep the earnings streak alive? Let’s see how things are shaping up for this announcement.

Earnings Whispers

Our proven model conclusively shows that Plum Creek is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least Rank #2 or #3 for this to happen. Plum Creek has the right combination of these two key ingredients that are elaborated below.

Positive Zacks ESP: The Earnings ESP for Plum Creek is +2.38 %. This is because the Most Accurate estimate stands at 43 cents while the Zacks Consensus Estimate is lower at 42 cents.
 
Zacks Rank: Plum Creek’s Zacks Rank #3 (Hold) enhances the predictive power of ESP. This combination of its Zacks Rank and Earnings ESP makes us confident of an earnings surprise call in the to-be-reported quarter.

What is Driving the Better-than-Expected Earnings?

We believe that Plum Creek’s diversified timber and land base will continue to help it draw positives from large economies of scale. Also, the upsurge in housing markets demographic trends and real estate assets demand across the country provides a strong upside potential for the company. Therefore, with solid fundamentals, Plum Creek is well poised to maintain its growth curves and simultaneously benefit shareholders.

Growth in single family homes construction is expected to drive the demand for wood. Moreover, decent domestic demand and an active export market are expected to support healthy sawlog prices.

During the quarter, Plum Creek penned a long-term fiber supply and services deal with the bioenergy firm, The Enova Group. Also, the company penned a deal to acquire interest in around 255 million tons of crushed stone production at 4 quarries from Vulcan Materials Co. (VMC - Analyst Report), positioned at metro Atlanta, GA for $154 million.

The move comes as Plum Creek focuses on leveraging on the construction material production in the lucrative southeastern markets. Plum Creek will enjoy royalty payments from the production and sale of crushed stone, mined from the quarries over the next 25 years, starting this October. A similar deal was also signed with Vulcan earlier this year for four SC-based quarries.

Plum Creek’s operating environment during the third quarter and its activities were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter moved up 2.4% to 42 cents per share over the last 30 days.

Stocks to Consider

Here are a couple of REIT stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Cousins Properties Inc. (CUZ - Analyst Report) has an earnings ESP of +20.00 % and carries a Zacks Rank #3. It is scheduled to report third-quarter results on Oct 30, 2013 after the market close.

The earnings ESP for Public Storage (PSA - Analyst Report) is +3.70% and it carries a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 31, 2013.

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