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Why Is Weyerhaeuser (WY) Up 1.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Weyerhaeuser (WY - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Weyerhaeuser due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Weyerhaeuser's (WY - Free Report) Q3 Earnings Top, Revenues Miss Estimates

Weyerhaeuser Company reported decent third-quarter 2020 results, wherein earnings comfortably surpassed the Zacks Consensus Estimate but revenues missed the same. The company delivered strong performance across businesses despite disruptions from severe weather, unprecedented forest fires and the ongoing COVID-19 pandemic.

Devin W. Stockfish, president and chief executive officer of Weyerhaeuser said, “Entering the fourth quarter, Weyerhaeuser is operating from a strong financial position, and we are increasingly confident that the recent strength in U.S. housing will continue notwithstanding ongoing macroeconomic headwinds."

Inside the Headlines

The company reported adjusted earnings of 52 cents per share, which surpassed the consensus mark of 39 cents by 33.3% and increased by a whopping 550% from the year-ago figure of 8 cents.

Net sales of $2,110 million missed the consensus mark by 0.6%. The reported figure, however, grew 26.3% from $1,671 million reported in the prior-year quarter.

Adjusted EBITDA came in at $745 million for the quarter, up 141.9% from $308 million in the year-ago period.

Segments Details

Timberlands: Net sales (including inter-segment sales of $107 million) in the segment came in at $452 million, down 13.6% from the year-ago figure of $523 million. In the West, fee harvest volumes were down 15% sequentially as wildfire conditions restricted harvest activity. This was largely offset by higher average sales realizations for domestic logs. Domestic log sales volumes were down modestly and export log sales volumes were significantly lower sequentially as the company shifted volume to the domestic market for taking advantage of higher-margin opportunities. Meanwhile, in the South, fee harvest volumes dropped 5% as the company continued to reduce 2020 fee harvest volumes. Average log sales realizations remained on par with the second quarter and forestry spending increased seasonally. Adjusted EBITDA came in at $130 million, down 15.6% from $154 million in the year-ago quarter.

Real Estate, Energy and Natural Resources: Segment’s net sales amounted to $69 million, which was unchanged from the year-ago level. Adjusted EBITDA of $60 million also remained same as the year-ago level.

Wood Products: Sales in the segment totaled $1,696 million, up 40.9% from $1,204 million in the prior-year quarter. Adjusted EBITDA came in at $615 million, up 400% from the year-ago figure of $123 million.  Market demand for wood products has been improving post April. Also, a 54% sequential increase in average sales realizations for lumber and 65% growth for oriented strand board are positives. Sales volumes for engineered wood products also increased significantly from a year ago.

Financial Highlights

The company had ample liquidity, including $787 million in cash and cash equivalents, along with $1.5 billion of undrawn revolver capacity as of Sep 30, 2020. In the second quarter, Weyerhaeuser had cash and cash equivalents of $643 million. Long-term debt was $5,974 million at quarter-end versus $6,147 million at 2019-end.

Net cash from operations was $1,085 million for the first nine months of 2020 compared with $674 million in the comparable year-ago period.

Weyerhaeuser’s board of directors reinitiated quarterly cash dividend. The board is also implementing a new dividend framework to enhance its ability of returning cash to shareholders.

Outlook

For the fourth quarter, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment. Geographically, in the West, the company expects higher average sales realizations for domestic and Japanese export logs, as well as improved log sales volumes as Oregon harvest activity resumes and salvage operations begin. In the South, it expects slightly higher forestry expense and marginally lower average log sales realizations due to mix.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates sequentially lower earnings and adjusted EBITDA for the fourth quarter. This is due to the timing of real estate transactions. For 2020, it expects adjusted EBITDA to be $235 million.

Within the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly lower on a sequential basis. It expects a modest seasonal reduction in sales volumes, higher Western and Canadian log costs, as well as lower operating rates for some product lines due to planned maintenance outages.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted 23.46% due to these changes.

VGM Scores

Currently, Weyerhaeuser has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Weyerhaeuser has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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