Weyerhaeuser Company (WY Quick QuoteWY - Free Report) shares have gained 12.6% in the past three months compared with the Zacks Building Products - Wood industry’s 17.6% growth, the Zacks Construction sector’s 19.2% rise and the S&P 500 Index’s 8.3% improvement.

Although this leading forest product company’s shares have underperformed the industry and sector, it is expected to gain in 2024, given improvements in the home and R&R market activities. Its focus on operational excellence is also expected to drive growth.

WY has seen an upward estimate revision for 2024 earnings to $1.19 per share from $1.18 over the past 30 days. This depicts analysts' optimism over the company’s prospects. The estimates for 2024 earnings reflect 17.6% year-over-year growth and 4.1% revenue improvement. The firm’s earnings surpassed estimates in three of the trailing four quarters and met on one occasion, the average surprise being 40.2%.

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Its focus on operational excellence and efforts to boost financial flexibility enabled it to generate solid cash flow and strengthen the balance sheet. Weyerhaeuser remains optimistic about its performance due to favorable demographics and a decade of underbuilding and historically low inventory for new and existing homes.

Let’s check out the factors strengthening this Zacks Rank #3 (Hold) company’s existing position, defying the odds. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Improving Housing and Repair & Remodel Activity to Boost Demand

Residential construction, as well as repair and remodel market activity, is improving gradually. This is supported by steady demand from the professional segment and a normalized do-it-yourself segment to a pre-pandemic level.

In the near term, Weyerhaeuser expects stable demand from the repair and remodel segment, most likely attributed to lower building product prices and customers' demand for remodeling homes instead of purchasing new houses. WY remains bullish for the long term as most of the key drivers supporting healthy repair and remodel demand remain intact, including solid home equity levels and an aging housing stock.

Rising Spending on Carbon/ESG Projects

Governments and businesses across the globe are making efforts to address climate change and aim to reduce greenhouse gas emissions to net zero significantly. The company remains uniquely positioned to help entities achieve these goals through natural climate solutions, including forest carbon sequestration and carbon capture, as well as storage activities.

More capital inflows for carbon/ESG-related projects are likely to prove beneficial for Weyerhaeuser. For the Natural Climate Solutions business, the firm continues to remain engaged with high-quality developers for renewable energy and carbon capture and storage opportunities across its acreage. The recent passage of the Inflation Reduction Act should drive incremental demand for these markets and further support Natural Climate Solutions’ growth strategy.

Weyerhaeuser is in the process of developing various additional forest carbon projects within its U.S. Timberlands. This includes two in the South, which are scheduled to receive approval in the first half of 2024. Considering the company’s expertise and incomparable Timberlands portfolio, it is positioned to achieve a goal of growing the Natural Climate Solutions business to $100 million in EBITDA by 2025-end.

Operational Excellence to Offset Margin-Related Woes

Weyerhaeuser's focus on operational excellence has been advantageous over time. It remains focused on operational excellence, which includes merchandising for value, harvest and transportation efficiencies, along with flexing harvest to capture seasonal and short-term opportunities.

In the first nine months of 2023, the company delivered solid operational performance and remained determined in its operational excellence initiative to support customers and drive margins.

In Timberlands, the achievement was primarily attributed to initiatives for increasing mechanized harvesting in the West, implementing machine planting in the South and optimizing southern fertilization activity.

The business also created significant future value through its efforts to reduce reforestation turnaround time, further enhance seedling survival rates and improve data capture as well as analysis capabilities through the expanded use of drones and LIDAR technology.

In Wood Products, the company captured improvements, given a persistent focus on controllable costs, mill reliability and an enhanced product mix despite fluctuating operating postures in response to the pandemic.

Consistent Shareholders Value Enhancement

Weyerhaeuser has a unique dividend structure. It pays a normal periodic dividend, a variable dividend and sometimes special dividends. The company returned more than $1,144 million to its shareholders in the first nine months of 2023, including share repurchases completed in the period and dividends paid.

It is committed to growing its quarterly base dividend by 5% annually through 2025. The company is committed to supplementing its base dividends each year with an additional return of cash to achieve the targeted annual payout of 75% to 80% of adjusted FAD.

Three Stocks Outpacing the Industry

JELD-WEN Holding, Inc. (JELD Quick QuoteJELD - Free Report) : Headquartered in Charlotte, NC, JELD-WEN designs, manufactures and sells doors and windows primarily in North America, Europe and Australasia. JELD has taken a two-pronged approach to streamline and strengthen JELD-WEN in order to improve the short-term financial performance as well as position the company well for the long term.

JELD — which has gained 35.7% in the past three months — has seen an upward estimate revision for 2024 earnings to $1.65 per share from $1.64 over the past 60 days. The company’s earnings surpassed earnings estimates in each of the trailing four quarters, leading to an average surprise of 126.5%. It carries an impressive VGM Score of A.

Louisiana-Pacific Corporation (LPX Quick QuoteLPX - Free Report) : LPX is a leading manufacturer of sustainable, quality-engineered wood building materials, structural framing products and exterior siding for residential, industrial and light commercial construction.

LPX’s shares gained 28.9% in the past three months. The company’s earnings surpassed earnings estimates in three of the trailing four quarters but missed on one occasion, leading to an average surprise of 98.3%. Louisiana-Pacific has seen an upward revision of 2024 earnings to $3.85 per share from $3.84 in the past seven days. It carries an impressive VGM Score of B.

Boise Cascade Company (BCC Quick QuoteBCC - Free Report) : Based in Boise, ID, this company makes wood products and distributes building materials in the United States as well as Canada. Although BCC acknowledged that the industry faced challenges in 2023, it remains well-positioned for 2024 to execute the growth initiatives that started in 2022.

BCC gained 27.3% in the past three months. The company’s earnings surpassed estimates in three of the trailing four quarters but missed on one occasion, leading to an average surprise of 20.3%. The stock has seen an upward estimate revision for 2024 earnings to $11.10 per share from $10.90 over the past seven days. It carries an impressive VGM Score of A.