Back to top

Image: Bigstock

Factor Setting the Tone for Weyerhaeuser's (WY) Q3 Earnings

Read MoreHide Full Article

Weyerhaeuser Company (WY - Free Report) is slated to report third-quarter 2022 results on Oct 27, after the closing bell.

In the last-reported quarter, the company’s earnings and net sales surpassed the Zacks Consensus Estimate by 3.9% and 6%, respectively. Quarterly adjusted earnings and net sales for the quarter, however, decreased 22.6% and 5.4%, respectively.

Weyerhaeuser’s earnings beat the consensus mark in all the last four quarters, with the average surprise being 7%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to 41 cents from 43 cents per share over the past 30 days. The estimated figure indicates a decrease of 31.7% from the year-ago level. The consensus mark for revenues is $2.27 billion, suggesting a 3.3% year-over-year decline.

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote

Factors to Note

Last month, Weyerhaeuser revised third-quarter 2022 operating guidance, considering the recent impact of September work stoppages in its Oregon and Washington operations, stemming from ongoing union negotiations.

Now, the company expects earnings and adjusted EBITDA for Wood Products to be approximately $40 million lower than the second quarter of 2022, excluding the impact of sales realizations for lumber & oriented strand board (OSB), driven by labor and transportation constraints as well as the work stoppage in Washington and Oregon. Earlier, WY had expected Wood Products earnings and adjusted EBITDA to be comparable to second-quarter 2022.

WY now expects Timberlands earnings (before special items) and adjusted EBITDA to be comparable to the year-ago period, driven mainly by the work stoppage. It previously expected Timberlands adjusted EBITDA to sequentially lower but "moderately higher" from the year-ago period.

Meanwhile, WY has kept the guidance for its Real Estate, Energy & Natural Resources businesses unchanged. Weyerhaeuser’s earnings and adjusted EBITDA ares expected to be marginally lower than the year-ago period.

Overall, lower lumber and OSB prices are expected to have weighed on Weyerhaeuser’s third-quarter 2022 performance despite operational excellence improvements 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.

Other Projections

The Zacks Consensus Estimate for the Wood Products segment (contributing approximately 78% to revenues) revenues is pegged at $1,797 million, implying a decrease from $1,853 million in the year-ago period and $2,341 million in the second quarter.

The Zacks Consensus Estimate for the Timberland segment (contributing approximately 26% to revenues) revenues is pegged at $485 million, implying a decrease from $541 million in the year-ago period and $671 million in the second quarter.

The Zacks Consensus Estimate for the Real Estate, Energy and Natural Resources segment revenues is pegged at $67 million, implying a decline from $69 million a year ago and from $117 million in the prior quarter.

What the Zacks Model Unveils

Our proven model does 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 an Earnings ESP of -14.22% and a Zacks Rank #3.

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

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 on their respective quarters to be reported.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +0.80% and a Zacks Rank #3.

KBR’s earnings topped the consensus mark in all the last four quarters, with the average being 11.5%. Earnings for the to-be-reported quarter are expected to decline 1.6% year over year.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +1.46% and holds a Zacks Rank #3.

The earnings of URI topped the consensus mark in three of the last four quarters, with the average surprise being 8%. Earnings for the to-be-reported quarter are expected to grow 36.8% year over year.

Lennox International Inc. (LII - Free Report) has an Earnings ESP of +0.34% and a Zacks Rank #3.

The earnings of LII topped the consensus mark in three of the last four quarters, with the average surprise being 7.9%. Earnings for the to-be-reported quarter are expected to grow 22.1% year over year.

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

Published in