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Factor Setting the Tone for Weyerhaeuser's (WY) Q2 Earnings

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Weyerhaeuser Company (WY - Free Report) is slated to report second-quarter 2022 results on Jul 29, before the opening bell.

In the last reported quarter, the company’s earnings and net sales had surpassed the Zacks Consensus Estimate by 14.9% and 6.9%, respectively. Quarterly adjusted earnings of $1.31 per share had increased from the year-ago figure of 91 cents. Net sales for the quarter had come in at $3,112 million, which also increased 24.2% year over year.

Weyerhaeuser’s earnings beat the consensus mark in three of the last four quarters but missed the same on one occasion, with the average surprise being 5.9%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to $1.02 from $1.08 per share over the past 30 days. The estimated figure indicates a decrease of 25.6% from the year-ago level. The consensus mark for revenues is $2.80 billion, suggesting 10.8% year-over-year growth.

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote

Factors to Note

Lower lumber and oriented strand board (OSB) prices are expected to have weighed on Weyerhaeuser’s second-quarter 2022 performance despite operational excellence improvements, strong demand and disciplined capital allocation moves of the company.

Meanwhile, transportation and resin shortages have been a headwind for the Wood business. Higher raw material costs for OSB web stock, resin and veneer may have also been a pressing concern.

As announced during the first-quarter 2022 earnings call, the company expects second-quarter earnings and adjusted EBITDA for the Wood Products segment (contributing approximately 78% to revenues) higher sequentially, excluding the effect of changes in average sales realizations for lumber and OSB. For lumber business, WY expects improved production volumes and moderately lower unit manufacturing costs in the second quarter. Sales volumes are expected to grow, with increased production, as well as higher seasonal inventory drawdown. It expects moderately lower log costs compared to the first quarter, primarily for Western logs.

For OSB business, WY expects moderately higher sales volumes sequentially, resulting from higher production volumes and improving transportation networks, primarily in Canada. Unit manufacturing costs are expected to be slightly lower and fiber costs are expected to be comparable.

The Zacks Consensus Estimate for the Wood Products segment revenues is pegged at $2,412 million, implying a decrease from $2,629 million in the year-ago period and $2,519 million in the first quarter.

For the Timberland segment (contributing approximately 26% to revenues), Weyerhaeuser expects earnings and adjusted EBITDA in the Timberland segment to be lower than first-quarter 2022. Nonetheless, the metrics will be higher than any other quarter since fourth-quarter 2018. In the West, it expects comparable fee-harvest volumes and lower sales realizations. WY anticipates per unit log and haul costs to be higher sequentially. In the South, the company expects sales realizations to be in line with first-quarter 2022. It anticipates seasonally higher forestry and road costs in the region. Meanwhile, WY expects higher fee-harvest volumes and per unit log and haul costs.

For the Real Estate, Energy and Natural Resources segment (contributing about 3% to total revenues), Weyerhaeuser anticipates earnings to be in line on a year-over-year basis. Adjusted EBITDA is expected to be marginally higher than the year-ago period.

The Zacks Consensus Estimate for the Real Estate, Energy and Natural Resources segment revenues is pegged at $107 million, implying a decline from $110 million a year ago and from $128 million in the prior quarter.

What the Zacks Model Unveils

Our proven model doesn’t not conclusively predict an earnings beat for Weyerhaeuser this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, WY has a Zacks Rank #3 and an Earnings ESP of -1.48%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Lennox International Inc. (LII - Free Report) has an Earnings ESP of +1.61% and carries a Zacks Rank #3.

The earnings of LII topped the consensus mark in three of the last four quarters but missed on one occasion, with the average surprise being 8.2%.

Eagle Materials Inc. (EXP - Free Report) has an Earnings ESP of +1.56% and holds a Zacks Rank #3.

The earnings of EXP topped the consensus mark in three of the last four quarters, with the average surprise being 4.8%.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +1.81% and a Zacks Rank #1.

The earnings of KBR topped the consensus mark in the last four quarters, with the average surprise being 12%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.