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Bull of the Day: Potlach (PCH)

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Inflation is a word that scares many investors. I am not sure why. In the grand scheme of things, inflation can be very good for the right kinds of stocks. I understand that it increases the input costs of goods across the board, but what if you are in the business of providing those inputs? Wouldn’t that be a big shot in the arm? Of course it would be.

Today’s Bull of the Day is a stock that is benefiting from a spike up in inflation. I’m talking about Zacks Rank #1 (Strong Buy) Potlach (PCH - Free Report) . Potlach is in the Building Products – Wood industry which ranks in the Top 4% of our Zacks Industry Rank. PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns 1.8 million acres of timberlands in Alabama, Arkansas, Idaho, Louisiana, Minnesota and Mississippi. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program.

The reason for the favorable rank is the recent positive earnings estimate revisions coming from analysts. Over the last sixty days, two analysts have increased their estimates for the current year while one has done so for next year. The bullish sentiment has bumped up our Zacks Consensus Estimate for the current year from $6.03 to $6.20 while next year’s number is up from $2.58 to $3.07.

These estimates have bumped up recently, but that was not always the case. Looking back to the first half of last year, estimates peaked then came down to Earth. A good chunk of that action can be attributed to the huge spike in lumber prices. Those prices have normalized recently, which has reeled in earnings estimates for this stock. Still, that inflationary pressure should remain a tailwind for the stock it the intermediate term.


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