The Zacks Building Products – Wood industry remains under pressure against a challenging operating backdrop. Rising construction costs, the risk of housing project delays and growing affordability constraints continue to weigh on demand. At the same time, the threat of tariffs has heightened concerns over retaliatory trade measures, adding further strain to global trade flows. Spending on home repair and remodeling has also cooled from pandemic-driven peaks as elevated mortgage rates squeeze household budgets. With homeownership increasingly out of reach for many buyers, demand conditions remain difficult for wood industry participants.

However, there is still a strong need for investments in critical replacements, addressing home performance issues and modernizing the country’s aging housing stock. Additionally, increased funding for infrastructure and carbon/ESG-related projects has been a positive development. While concerns persist regarding high mortgage rates and cautious consumer spending, effective cost management, ongoing product innovation and strategic acquisitions are expected to support industry players such as Weyerhaeuser Company (WY Quick QuoteWY - Free Report) and Rayonier Inc. (RYN Quick QuoteRYN - Free Report) .

Industry Description

The Zacks Building Products – Wood industry includes forest product companies and manufacturers of lumber as well as other wood products used in home construction, repair and remodeling, along with the development of outdoor structures. Companies in the industry design, manufacture, source and sell flooring products like tile, wood, laminate, vinyl and natural stone flooring products, as well as decorative and installation accessories. The industry players are also involved in the manufacturing and distribution of wood and plastic composite products, along with related accessories, mainly for residential decking and railing applications. The industry also includes timberland real estate investment trusts, or REITs.

4 Trends Shaping the Future of Building Products - Wood Industry

High Rates, Trade Policy and Tariffs: The industry’s prospects are highly correlated with the U.S. housing and the R&R market (considered one of the largest in terms of lumber demand) conditions. The U.S. housing market remained constrained by elevated interest rates and subdued consumer confidence. Buyer urgency was low in both new and existing home markets, and large public builders continued to use rate buydowns to stimulate demand. Economic uncertainty and ongoing weakness in home sales and building material sales are limiting residential remodeling.

Meanwhile, the reimplementation of tariffs on Canadian softwood lumber by President Trump in 2025 presents significant implications for the U.S. wood industry. In January 2026, President Trump’s decision to delay higher tariffs on furniture, kitchen cabinets and vanities until Jan. 1, 2027 offers only limited relief and underscores the ongoing uncertainty weighing on the U.S. wood industry. Although the White House imposed a 25% tariff on these products in October 2025, steeper increases — to 30% for furniture and 50% for cabinets and vanities — were set to take effect in 2026 before being postponed. Keeping the tariff at 25% through at least 2027 does little to ease cost pressures for domestic wood producers, who continue to face demand volatility, cautious consumer spending and disrupted pricing dynamics across downstream housing and renovation markets.

Rapid Lumber Market Swings: Historically, volatility in lumber prices has been a major concern for the wood industry. Any unusual rise in the cost of lumber products sold by primary producers increases the cost of inventory and limits margins on fixed-priced lumber products. Yet, a decline in costs eats into profits as products sold are indexed to the current lumber market. Meanwhile, the timberland business is governed by federal rules and state forestry commissions, which are subject to frequent changes, affecting businesses. Due to the very nature of their properties, timberland REITs are required to follow eco-friendly mandates in their trade. 

Higher Spending on Infrastructure & Carbon/ESG Projects: The projected rate cuts are poised to increase affordability, stimulate residential activity and set the stage for growth in the wood industry. Additionally, government initiatives such as the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) are expected to boost infrastructure spending. This emphasis on modernization and clean energy is anticipated to drive growth for companies within the wood sector.

Acquisitions, Product Innovation & Efficient Cost-Reduction Strategies: The companies also bank on acquisitions and divestitures to expand and improve portfolio quality. New products continue to be an important top-line driver for the industry players. Also, efforts to introduce products are likely to have helped the players. Again, in a bid to reduce costs, companies have been reducing the cost structure of their facilities through the sale or shutdown of underperforming units and manufacturing facilities, as well as investments in technology. Also, the industry players have been focusing on operational excellence, comprising merchandising for value, harvest, and transportation efficiencies and boosting harvest to capture seasonal and short-term opportunities.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Building Products – Wood industry is an 11-stock group within the broader Construction sector. The Zacks Wood industry currently carries a Zacks Industry Rank #215, which places it in the bottom 12% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since October 2025, the industry’s earnings estimates for 2026 have decreased to $2.02 per share from $2.14.

Despite the industry’s blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Outperforms Sector, Lags S&P 500

The Zacks Building Products – Wood industry has outperformed the broader Zacks Construction sector but lagged the Zacks S&P 500 Composite over the past year.

Over this period, the industry has gained 6.5% compared with the broader sector’s 6% rise. The Zacks S&P 500 Composite has gained 19.5% over this period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing wood stocks, the industry trades at 28.47 compared with the S&P 500’s 23.36 and the sector’s 19.87.

Over the last five years, the industry has traded as high as 28.94X, as low as 10.23X and at a median of 18.54X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

2 Wood Stocks to Keep an Eye On

We have highlighted two stocks from the industry that have been capitalizing on fundamental strengths.

Rayonier: Rayonier is a leading timberland REIT with holdings in some of the most productive U.S. softwood regions. Rayonier’s outlook remains favorable, driven by its diversified timberland portfolio, growing real estate platform and expanding land-based solutions business. The company continues to unlock higher-value uses from its land through conservation sales, residential and mixed-use developments while maintaining disciplined capital allocation and financial flexibility. The planned merger with PotlatchDeltic is expected to further strengthen scale, diversification and operational efficiency, enhancing long-term earnings resilience. Upon closing of the transaction, Rayonier shareholders will own approximately 54% and PotlatchDeltic shareholders will own approximately 46% of the combined company. Although timber markets face near-term demand pressures, structural supply constraints, supportive trade policies and a potential housing recovery provide longer-term upside. In addition, opportunities in carbon markets, renewable energy and climate-focused land solutions add incremental growth avenues for Rayonier.

Rayonier — a Zacks Rank #2 (Buy) company — has lost 15.9% over the past year. The company has seen an upward estimate revision for 2026 earnings to 57 cents from 56 cents per share over the past 30 days. The Zacks Consensus Estimate for its 2026 earnings per share (EPS) calls for 20.6% year-over-year growth. Rayonier’s earnings surpassed the consensus mark in the last three reported quarters, with the average being 14.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: RYN

Weyerhaeuser: Weyerhaeuser’s outlook is underpinned by its diversified asset base and favorable long-term demand drivers, even as near-term market conditions remain challenging. Management highlighted confidence in U.S. housing fundamentals, citing demographic tailwinds, an underbuilt housing stock and the expectation of improved activity as interest rates ease and uncertainty fades. The company continues to actively optimize its high-quality timberlands portfolio through disciplined acquisitions and divestitures, enhancing long-term value. Growth in real estate monetization and Natural Climate Solutions, including carbon and CCS initiatives, adds incremental earnings streams. Combined with a strong balance sheet and cost discipline, Weyerhaeuser is positioned to benefit as end markets recover.

Weyerhaeuser — a Zacks Rank #3 (Hold) company — has lost 16.3% over the past year. The company has seen an upward estimate revision for 2026 earnings to 21 cents from 20 cents per share over the past seven days. The Zacks Consensus Estimate for its 2026 earnings per share (EPS) implies 39.8% year-over-year growth. Weyerhaeuser’s earnings surpassed the consensus mark in the last three reported quarters, with the average being 65.7%.

Price and Consensus: WY