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What to Expect from Rayonier (RYN) this Earnings Season?

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Rayonier Inc. (RYN - Free Report) — a timberland real estate investment trust (REIT) — is expected to report second-quarter 2017 results on Aug 2, after market closes. While the company’s funds from operations (“FFO”) per share for the quarter are anticipated to improve year over year, revenues might see a decline.

Currently, the company’s second-quarter 2017 earnings estimate per share is pegged at 11 cents. Rayonier’s first-quarter 2017 pro forma net income per share came in at 5 cents, missing the Zacks Consensus Estimate of 9 cents.

Over the trailing four quarters, Rayonier beat estimates in three occasions and missed in the other, recording an average beat of 72.8%. The graph below depicts this surprise history:
 

Rayonier Inc. Price and EPS Surprise

 

Rayonier Inc. Price and EPS Surprise | Rayonier Inc. Quote

Factors to Influence Q2 Results

Rayonier’s portfolio of timberlands enjoys geographical diversity and is located in the productive timber-producing regions of the U.S. Recent developments in the field of biogenetics and cloning have significantly benefited this timberland REIT’s business.  The company is aimed at consistently monetizing higher and better uses (HBU) properties through rural land sales for raising the value of its portfolio. Additionally, the favorable demand-supply dynamics has enhanced the company’s pricing power.

However, Rayonier faces cut-throat competition in the market from national and local players. Increasing rivalry from a variety of substitute products, like non-wood and engineered wood products only add to its woes. The company is subject to foreign exchange fluctuations because a number of its segments export products outside the nation.

Timberland REITs have to comply with strict regulatory requirements compared with other industries. These laws and regulations, which are subject to frequent changes, adversely affect Rayonier’s business. Further, due to the very nature of the properties, timberland REITs are required to follow eco-friendly mandates in their trade.

In addition, Rayonier’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for Q2 FFO remained unchanged at 11 cents over the last 60 days.

Earnings Whispers

Our proven model does not conclusively show that Rayonier will likely beat earning estimates this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks ESP: The Most Accurate estimate matches the Zacks Consensus Estimate of 11 cents, which translates into an Earnings ESP of 0.00%.

Zacks Rank: Rayonier’s Zacks Rank #4 (Sell) reduces the predictive power of ESP.

However, the stock has gained 9% year to date, outperforming 11.4% growth recorded by the industry it belongs to.




Stocks That Warrant a Look

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

CyrusOne Inc. , slated to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Piedmont Office Realty Trust, Inc. (PDM - Free Report) , which is scheduled to release earnings on Aug 2, has an Earnings ESP of +2.27% and a Zacks Rank #3.

Boston Properties, Inc. (BXP - Free Report) is set to release earnings on Aug 1, has an Earning ESP of+0.62% and a Zacks Rank #3.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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