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Weyerhaeuser (WY) to Optimize Oregon Timberland Holdings

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Weyerhaeuser Company (WY - Free Report) , via an agreement, has decided to buy timberlands from and sell the same to funds managed by Hancock Natural Resource Group, a Manulife Investment Management company. The net cost of these two separate transactions, which are expected to close in fourth-quarter 2020, is approximately $40 million in cash.

Per the agreement, in one transaction, the company intends to purchase approximately 85,000 acres of timberlands in mid-coastal Oregon. Again, in another transaction, the company will divest 149,000 acres of timberlands in southern Oregon.

Devin W. Stockfish, the company’s president and chief executive officer, said, "These two agreements represent a unique opportunity to further enhance Weyerhaeuser's Western timberlands portfolio with exceptional land that is contiguous with our existing ownership."

These transactions will enable Weyerhaeuser to add highly productive timberland with low operating costs within its portfolio. These properties have strong access to key domestic and export markets, and the company anticipates to receive immediate and long-term value for the company’s shareholders.

Optimization of the Timberlands Portfolio Bodes Well

Weyerhaeuser has been strategically focusing on optimizing the timberland portfolio. To this end, in March 2020, the company sold 630,000 acres of Montana timberlands to Southern Pine Plantations for $145 million in cash.

Weyerhaeuser, one of the world's largest private owners of timberlands, owns or controls about 11 million acres of timberlands in the United States. It also manages more timberlands under long-term licenses in Canada.

Weyerhaeuser remains focused on operational excellence that includes merchandising for value, harvest and transportation efficiencies, along with flexing harvest to capture seasonal and short-term opportunities. Also, the initiative focuses on optimizing silviculture spend, reducing growth costs, and improving log and hauling efficiencies across all geographies.

Shares of Weyerhaeuser have advanced 39.2% over the past three months, outperforming the industry’s 31.9% rally. The company has been benefiting from operational excellence efforts and improving market conditions.

Despite rapidly changing market conditions owing to the COVID-19 pandemic outbreak, Weyerhaeuser posted impressive first-half 2020 results. Markets have been showing resilience of late and housing is witnessing an impressive comeback on major data points, given low mortgage rates. With the opening of the economy, the demand for housing and wood products has been improving amid broad economic disruption since late May 2020. The remarkable recovery in single-family housing construction and repair/remodel activity led to surging lumber prices in August, which hit new all-time high. This is expected to provide a major boost to the company’s EBITDA for third-quarter 2020.

Zacks Rank

Weyerhaeuser — which shares space with Universal Forest Products, Inc. (UFPI - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) and Trex Company, Inc. (TREX - Free Report) in the Zacks Building Products - Wood industry — currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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