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Weyerhaeuser Company (WY - Analyst Report) reported earnings per share, before special items, of 27 cents in the fourth quarter 2013, a cent above year-ago earnings and in line with the Zacks Consensus Estimate.   

In 2013, earnings per share, before special items, came in at $1.14, almost double of 58 cents earned in 2012. However, the bottom line marginally lagged the Zacks Consensus Estimate of $1.15.

Revenue

Weyerhaeuser generated net sales of $2,256 million, up 12.8% year over year and above the Zacks Consensus Estimate of $2,234 million.

As for the segments, Timberland revenue increased 22.1% year over year to $364 million and accounted for 16.1% of the total revenue. Revenue from Wood Products was up 11.3% to $926 million and represented 41.0% of total revenue.

Revenue generated from Cellulose Fibers, roughly 21.2% of total revenue, increased 3.2% to $478 million, while Real Estate, with about 21.6% of total revenue, increased 19.9% to $488 million.

In 2013, Weyerhaeuser generated revenues of $8,529 million, reflecting an increase of 20.8% year over year. The top line was also above the Zacks Consensus Estimate of $8,493 million.

Margins

Weyerhaeuser reported a 12.9% year-over-year increase in its cost of sales for the fourth quarter 2013, which as a percentage of revenue came in at 79.1%. Selling, general and administrative expenses were 7.8% of revenue and decreased 3.3% over the year-ago quarter. Research and development expenses were about $10 million, up from $9.0 million incurred in the year-ago quarter.

Balance Sheet

Exiting the fourth quarter of 2013, Weyerhaeuser's cash and cash equivalents (Forest Products and Real Estate) were down to $835 million from $903 million in the previous quarter. Long-term debt was at $4,891 million, down 2.2% sequentially.
 
Cash Flow

Weyerhaeuser’s cash generation from operating activities increased 38.1% year over year to $348 million. Capital expenditure increased from $59 million in the year-ago quarter to $110 million in the fourth quarter 2013.

In 2013, cash dividends paid amounted to $458 million while there were no share repurchases.

Outlook: For the first quarter of 2014, Weyerhaeuser anticipates earnings to increase at the Timberlands segment from the sequentially preceding quarter. Higher export demand will drive volumes and selling prices higher in the West. Road and silviculture expenses are expected to decline. In the South, higher expenses will erode profits from higher pulpwood realizations. Earnings are anticipated to be very low from the disposition of timberlands.

For the Wood Products segment, earnings are expected to increase sequentially driven by higher lumber selling prices and volumes. These are expected to be partially offset by higher log costs and difficult weather conditions.

For the Cellulose Fibers segment, Weyerhaeuser anticipates lower earnings sequentially. Decline in pulp sales volumes and higher expenses will be partially offset by improved realizations from liquid packaging board.

For the Real Estate segment, management anticipates modest profits from single-family homebuilding operations. Home closings are expected to decrease.

Weyerhaeuser currently has a market capitalization of $17.9 billion and carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the building products industry include Vulcan Materials Co. (VMC - Analyst Report), Potlatch Corp. (PCH - Snapshot Report) and United Rentals, Inc. (URI - Snapshot Report). While Vulcan Materials sports a Zacks Rank #1 (Strong Buy), both Potlatch Corporation and United Rentals hold a Zacks Rank #2 (Buy).

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