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Weyerhaeuser Company (WY) - $25 value - yours FREE >>
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Weyerhaeuser Company (WY) - $25 value - yours FREE >>
Louisiana-Pacific Corporation (LPX) - $25 value - yours FREE >>
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Weyerhaeuser (WY) Now a Strong Sell On Gloomy Prospects
Zacks Investment Research downgraded Weyerhaeuser Company (WY - Free Report) to a Zacks Rank #5 (Strong Sell) on Jul 7, 2016. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.
Why the Downgrade?
Market sentiments are against Weyerhaeuser Company, given a 3.8% fall in share prices, since the company announced first-quarter 2016 results on May 6. Investors seem to be skeptical about the company’s future prospects, evident from downward revisions in earnings estimates for the stock.
Over the last 60 days, the Zacks Consensus Estimate for Weyerhaeuser has fallen 14.7% to 93 cents per share for 2016 and 9.7% to $1.21 for 2017. Also, the company has an Earnings ESP of -5.38% for 2016 and -10.74% for 2017.
WEYERHAEUSER CO Price and Consensus
WEYERHAEUSER CO Price and Consensus | WEYERHAEUSER CO Quote
Recently, Weyerhaeuser converted its outstanding 6.375% Mandatory Convertible Preference Shares, Series A into common shares. The conversion has inflated the company’s basic share count and in turn, will likely dilute its earnings per share in the quarters ahead. Ending first-quarter 2016, the company had approximately 759 million outstanding common shares.
To add to the woes, Weyerhaeuser’s exposure to certain headwinds like stiff competition, adverse currency translation and geopolitical issues might restrict its growth momentum in the near term. Also, the company is highly levered, with long-term debt of approximately $7.8 billion at the end of first-quarter 2016. If unchecked, these huge debt levels will increase the company’s financial obligations and hurt its profitability.
Stocks to Consider
Though Weyerhaeuser Company with a current market capitalization of $22.5 billion is off the investors’ radar, there are some building products stocks with higher investment values. These stocks include Louisiana-Pacific Corp. (LPX - Free Report) , Armstrong Flooring, Inc. and Potlatch Corporation (PCH - Free Report) . While Louisiana-Pacific sports a Zacks Rank #1 (Strong Buy), both Armstrong Flooring and Potlatch Corporation carry a Zacks Rank #2 (Buy).
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