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Weyerhaeuser Co. (WY - Analyst Report) reported its financial results for the first quarter 2011 on April 29. Earnings per share were nil and excluded an 18 cent per share (or $96 million) gain from the sale of non-strategic timberlands, compared with a loss of 7 cents per share in the first quarter of 2010 and 10 cents in the previous quarter.

Also, the quarter's results were well below the Zacks Consensus Estimate of 14 cents. Including the one-time gain, reported earnings per share in the quarter were 18 cents.

Adjusted net income in the quarter improved year over year to $3 million compared with a net loss of $15 million in the year-ago quarter.

Revenue

Net sales in the quarter were $1,578 million, down 5.2% sequentially and up 11.2% year over year. The y/y increase was based on stronger revenue from all segments while the sequential fall was due to weak Real Estate and Cellulose Fibers results. Revenue, however, was below the Zacks Consensus Estimate of $1,635 million.

In the first quarter, Timberland revenue increased 13.9% year over year to $230 million and accounted for 14.6% of the total revenue. Revenue from Wood Products was up 3.3% to $624 million and represented 39.5% of total revenue.

Revenue generated from Cellulose Fibers, roughly 32.1% of total revenue, increased 23.4% to $506 million, while Real Estate, roughly 10.1% of total revenue, went up 6.0% to $160 million. Finally, revenue from corporate and other sources, 3.7% of total revenue, was $58 million.

On a sequential basis, revenue from Real Estate was down 47.5% year over year and Cellulose Fibers was down 1%. The decline was offset to some extent by an 11.1% growth in Timberland and 9.1% growth in Wood Products segment.

During the quarter, the company disposed roughly 82,000 acres of timberlands in southwestern Washington to the Hancock Timber Resource Group for approximately $200 million.

Margins

Cost of goods sold increased 7.5% year over year and represented 83.9% of total revenue. Selling, general and administrative expenses were 11.3% of revenue and up 9.8% year over year. Research and development expenses were down 12.5% and were 0.4% of total revenue.

Operating income was $238 million versus $84 million in the year-ago quarter. Margin stood at 15.1%.

Balance Sheet

Exiting the first quarter, Weyerhaeuser had cash and cash equivalents (Forest Products and Real Estate) of approximately $1,463 million versus $1,467 million in the previous quarter. Long-term debt was approximately $5,058 million compared with $5,060 million in the previous quarter.

Cash Flow

Net cash flow from operating activities in the quarter was approximately ($109) million versus $178 million in the year-ago quarter. Capital expenditure decreased 23.9% to $35 million versus $46 million in the year-ago quarter.

In the quarter, the company paid dividends amounting to $81 million.

Weyerhaeuser is one of the leading U.S. forest product companies, primarily engaged in growing and harvesting timber; manufacture, distribution, and sale of forest products; and real estate development and construction.The company faces competition from International Paper Co. (IP - Analyst Report) and Louisiana-Pacific Corp. (LPX - Snapshot Report).

We are currently maintaining a Neutral recommendation on Weyerhaeuser.

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