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Factors Setting the Tone for Weyerhaeuser's (WY) Q4 Earnings

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Weyerhaeuser Company (WY - Free Report) is slated to report fourth-quarter 2023 results on Jan 25, after the closing bell.

In the last reported quarter, the company’s earnings met the Zacks Consensus Estimate and net sales missed the same by 4.4%. Quarterly adjusted earnings and net sales for the quarter decreased 21.4% and 11.2%, respectively.

Weyerhaeuser’s earnings beat the consensus mark in all the last four quarters, with the average surprise being 40.2%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has declined to 15 cents from 17 cents over the past 30 days. The estimated figure indicates a decrease of 37.5% from the year-ago level. The consensus mark for revenues is $1.86 billion, suggesting a 1.8% 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

Low fee harvest volumes and sales prices, along with a moderate uptick in sales volumes for oriented strand board or OSB and lumber, are expected to have reflected in the company’s fourth-quarter top line. Nonetheless, operational excellence improvements and disciplined capital allocation moves are expected to have partly offset the negatives.

Meanwhile, forestry and road expenses, higher fiber costs, along with higher raw material costs have been a headwind for the business. Higher raw material costs for OSB web stock, resin and veneer may also have been a pressing concern.

In December 2023, WY updated its expectations for the fourth quarter. WY lowered its fourth-quarter Wood Products EBITDA forecast due to lower-than-expected lumber results. The company now expects fourth-quarter Wood Products EBITDA to be approximately $30 million below the third-quarter level, excluding the effect of changes in average sales realizations for lumber and OSB, given lower lumber sales volumes and higher unit manufacturing costs. Overall, WY is on track to generate about $154 million in Wood Products EBITDA. Lower sales volume and higher unit manufacturing costs are expected to have impacted the lumber results. This is due to lower production levels, driven by holiday downtime taken at Pacific Northwest mills.

Our model predicts Wood Products segment revenues (which accounted for approximately 76% of third-quarter 2023 revenues) to increase 3.4% year over year but decrease 10.5% sequentially to $1,375.8 million in the quarter. Adjusted EBITDA is expected to decline 21.7% from a year ago and 52.9% sequentially to $154.3 million.

Weyerhaeuser expects Timberland segment earnings (before special items) and adjusted EBITDA to be comparable sequentially. In the western region, the company anticipates that fee harvest volumes, sales prices, and forestry and road expenses will show similar performance compared with the prior quarter. However, per-unit log and haul costs are expected to be slightly elevated. In the southern region, the company foresees that fee harvest volumes, sales prices, and per-unit log and haul costs will remain consistent with those in the third quarter. Nevertheless, forestry and road expenses are projected to be somewhat reduced.

We expect the Timberland segment net sales (which accounted for 25.8% of third-quarter net sales) to drop 9.8% year over year and 5.1% sequentially to $494.2 million. Adjusted EBITDA is expected to decline 4.7% from a year ago and is almost comparable to the third-quarter level at $142.9 million.
 
Meanwhile, in the Real Estate, Energy and Natural Resources segment, Weyerhaeuser expects earnings and adjusted EBITDA to be lower compared with the third quarter, thanks to the timing and mix of sales.

Our model predicts the Real Estate, Energy and Natural Resources segment (which accounted for 3.8% of third-quarter net sales) net sales to be $70.8 million, up 28.7% year over year but down 32.6% sequentially. Adjusted EBITDA is expected to grow 23.2% from a year ago but down 39.7% sequentially to $56.7 million.

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 -6.67% and carries a Zacks Rank #3.

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.

Fluor Corporation (FLR - Free Report) has an Earnings ESP of +3.07% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

FLR’s earnings for the to-be-reported quarter are expected to grow 25.6%. The company reported better-than-expected earnings in two of the last four quarters but missed on other two occasions, the average surprise being 37.5%.

Martin Marietta Materials, Inc. (MLM - Free Report) has an Earnings ESP of +1.45% and carries a Zacks Rank #3.

MLM’s earnings topped the consensus mark in all the last four quarters, with the average being 37.3%. Earnings for the to-be-reported quarter are expected to rise 30.6% year over year.

Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +0.45% and carries a Zacks Rank #3.

VMC’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, with the average being 13.6%. Earnings for the to-be-reported quarter are expected to grow 25% year over year.

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

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