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Weyerhaeuser Company’s (WY - Free Report) second-quarter 2016 results came in below expectations. The company’s earnings, before special items were 17 cents per share, lagging the Zacks Consensus Estimate 20 cents by 15%. Also, the bottom line decreased 22.7% from the year-ago tally of 22 cents.
Talking about Weyerhaeuser’s top-line performance, net sales totaled $1.655 billion, below the Zacks Consensus Estimate of $1.84 billion. However, the top line grew 23% year over year.
Segmental Details
During second-quarter 2016, Weyerhaeuser announced the sale of its pulp and liquid packaging board facilities and hence, has treated the entire Cellulose Fibers segment as discontinued item in the quarter. Revenues generated from the discontinued items (the company’s Cellulose Fibers businesses) totaled $456 million, down 2.4% year over year.
Weyerhaeuser now operates through three business segments, results of which are detailed below:
Timberlands: In the quarter, the segment’s revenue (excluding intersegment sales) totaled $471 million, up 43.6% year over year. It accounted for 28.5% of net sales.
Real Estate, Energy and Natural Resources: The segment’s revenue, accounting for 2.3% of net sales, were $38 million, up 192.3% from the year-ago tally.
Wood Products: The segment generated revenue (excluding intersegment sales) of $1,146 million, accounting for 69.2% of net sales. Compared with the year-ago quarter, the result was up 14.1%.
Margins
In the quarter, Weyerhaeuser’s cost of sales increased 19% year over year, representing 76% of net sales compared with 78.6% in the year-ago quarter. Gross margin grew 260 basis points (bps) to 24%.
Selling, general and administrative expenses comprised 7% of net sales versus 6.5% in the year-ago quarter. Research and development expenses were $4 million, down from $5 million in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) came in at $413 million down from $278 million in the year-ago quarter. EBITDA margin in the quarter was 25%.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Weyerhaeuser’s cash and cash equivalents were $485 million, up from $415 million in the preceding quarter. Long-term debt increased 3.9% sequentially to $8,013 million.
In the quarter, Weyerhaeuser generated net cash of $492 million from its operating activities, up 34.1% year over year. Capital spending declined 16.2% to $83 million.
During the quarter, Weyerhaeuser paid dividends worth $228 million and repurchased $831 million worth of shares.
Outlook
For third-quarter 2016, Weyerhaeuser predicts sequentially lower earnings from the Timberland segment. While comparable fee harvest volumes, higher logging costs and lower export prices will influence the results in the West, the impact of higher fee harvest volumes will be partially offset by higher silviculture expenses in the South.
For Real Estate, Energy and Natural Resources segment, the company anticipates sequentially higher earnings on the back of improving real estate business.
For the Wood Products segment, improved price realizations for the products will results in sequentially higher earnings.
With a market capitalization of $24.4 billion, Weyerhaeuser currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the building products industry include Louisiana-Pacific Corp. (LPX - Free Report) , Potlatch Corporation (PCH - Free Report) and Norbord, Inc. . All these stocks sport a Zacks Rank #1 (Strong Sell).
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Weyerhaeuser (WY) Lags Q2 Earnings, Revises Segments
Weyerhaeuser Company’s (WY - Free Report) second-quarter 2016 results came in below expectations. The company’s earnings, before special items were 17 cents per share, lagging the Zacks Consensus Estimate 20 cents by 15%. Also, the bottom line decreased 22.7% from the year-ago tally of 22 cents.
Talking about Weyerhaeuser’s top-line performance, net sales totaled $1.655 billion, below the Zacks Consensus Estimate of $1.84 billion. However, the top line grew 23% year over year.
Segmental Details
During second-quarter 2016, Weyerhaeuser announced the sale of its pulp and liquid packaging board facilities and hence, has treated the entire Cellulose Fibers segment as discontinued item in the quarter. Revenues generated from the discontinued items (the company’s Cellulose Fibers businesses) totaled $456 million, down 2.4% year over year.
Weyerhaeuser now operates through three business segments, results of which are detailed below:
Timberlands: In the quarter, the segment’s revenue (excluding intersegment sales) totaled $471 million, up 43.6% year over year. It accounted for 28.5% of net sales.
Real Estate, Energy and Natural Resources: The segment’s revenue, accounting for 2.3% of net sales, were $38 million, up 192.3% from the year-ago tally.
Wood Products: The segment generated revenue (excluding intersegment sales) of $1,146 million, accounting for 69.2% of net sales. Compared with the year-ago quarter, the result was up 14.1%.
Margins
In the quarter, Weyerhaeuser’s cost of sales increased 19% year over year, representing 76% of net sales compared with 78.6% in the year-ago quarter. Gross margin grew 260 basis points (bps) to 24%.
Selling, general and administrative expenses comprised 7% of net sales versus 6.5% in the year-ago quarter. Research and development expenses were $4 million, down from $5 million in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) came in at $413 million down from $278 million in the year-ago quarter. EBITDA margin in the quarter was 25%.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Weyerhaeuser’s cash and cash equivalents were $485 million, up from $415 million in the preceding quarter. Long-term debt increased 3.9% sequentially to $8,013 million.
In the quarter, Weyerhaeuser generated net cash of $492 million from its operating activities, up 34.1% year over year. Capital spending declined 16.2% to $83 million.
During the quarter, Weyerhaeuser paid dividends worth $228 million and repurchased $831 million worth of shares.
Outlook
For third-quarter 2016, Weyerhaeuser predicts sequentially lower earnings from the Timberland segment. While comparable fee harvest volumes, higher logging costs and lower export prices will influence the results in the West, the impact of higher fee harvest volumes will be partially offset by higher silviculture expenses in the South.
For Real Estate, Energy and Natural Resources segment, the company anticipates sequentially higher earnings on the back of improving real estate business.
For the Wood Products segment, improved price realizations for the products will results in sequentially higher earnings.
WEYERHAEUSER CO Price, Consensus and EPS Surprise
WEYERHAEUSER CO Price, Consensus and EPS Surprise | WEYERHAEUSER CO Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $24.4 billion, Weyerhaeuser currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the building products industry include Louisiana-Pacific Corp. (LPX - Free Report) , Potlatch Corporation (PCH - Free Report) and Norbord, Inc. . All these stocks sport a Zacks Rank #1 (Strong Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>