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Weyerhaeuser (WY) Beats Q3 Earnings, Lags on Revenues
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Weyerhaeuser Company’s (WY - Free Report) third-quarter 2016 results came in above expectations, with a positive earnings surprise of 4.5%. The company’s earnings, before special items were 23 cents per share, above the Zacks Consensus Estimate 22 cents. However, the earnings were in line with the year-ago tally.
Weyerhaeuser’s third quarter net sales totaled $1.709 billion, below the Zacks Consensus Estimate of $1.74 billion. However, the top line grew 26.1% year over year.
In the third quarter, Weyerhaeuser’s discontinued Cellulose Fibers segment (pulp mills, a liquid packaging board facility, and a printing papers joint venture) generated revenue of $420 million.
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 $484 million, up 56.1% year over year. It accounted for 28.3% of net sales.
Real Estate, Energy and Natural Resources: The segment’s revenue, accounting for 2.8% of net sales, were $48 million, up 118.2% from the year-ago tally.
Wood Products: The segment generated revenue (excluding intersegment sales) of $1,177 million, accounting for 68.9% of net sales. Compared with the year-ago quarter, the figure was up 15.1%.
Margins
In the quarter, Weyerhaeuser’s cost of sales increased 22.5% year over year, representing 76.9% of net sales compared with 79.2% in the year-ago quarter. Gross margin grew 230 basis points to 23.1%.
Selling, general and administrative expenses comprised 5.9% of net sales versus 5.8% in the year-ago quarter. Research and development expenses were $5 million, above $4 million in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) came in at $434 million, above $245 million in the year-ago quarter. EBITDA margin in the quarter was 25.4%.
Balance Sheet & Cash Flow
Exiting the third quarter, Weyerhaeuser’s cash and cash equivalents were $769 million, up from $485 million in the preceding quarter. Long-term debt decreased 21% sequentially to $6,329 million.
In the quarter, Weyerhaeuser generated net cash of $347 million from its operating activities, up 23% year over year. Capital spending increased 13.2% to $120 million.
During the quarter, Weyerhaeuser paid dividends worth $231 million and repurchased $374 million worth of shares.
Also, the company completed its $2 billion accelerated share repurchase program and closed the divestiture its liquid packaging business.
Outlook
For the fourth quarter, Weyerhaeuser anticipates sequentially higher earnings from the Timberland segment. While higher realizations and lower fee harvest volume will influence the results in the West, the impact of higher fee harvest volumes and lower silviculture expenses will impact results 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, Weyerhaeuser predicts sequentially lower earnings due to lower sales volume for most of the products and lower realizations for oriented strand board.
With a market capitalization of $22.7 billion, Weyerhaeuser currently carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the industry include Louisiana-Pacific Corp. (LPX - Free Report) , Norbord, Inc. and Trex Co. Inc. (TREX - Free Report) . While Louisiana-Pacific and Norbord sport a Zacks Rank #1 (Strong Buy), Trex Co. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific Corp.’s financial performance has been impressive, with an average positive earnings surprise of 53% for the last four quarters. Also, earnings estimates for 2016 and 2017 have been revised upward over the last 60 days.
Norbord has an average earnings surprise of 134.29%, while earnings estimates for 2016 and 2017 have been revised upward over the last 60 days. Trex Co. performed well in three of four trailing quarters, with an average positive earnings surprise of 8.11%.
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Weyerhaeuser (WY) Beats Q3 Earnings, Lags on Revenues
Weyerhaeuser Company’s (WY - Free Report) third-quarter 2016 results came in above expectations, with a positive earnings surprise of 4.5%. The company’s earnings, before special items were 23 cents per share, above the Zacks Consensus Estimate 22 cents. However, the earnings were in line with the year-ago tally.
Weyerhaeuser’s third quarter net sales totaled $1.709 billion, below the Zacks Consensus Estimate of $1.74 billion. However, the top line grew 26.1% year over year.
Segmental Details
In the third quarter, Weyerhaeuser’s discontinued Cellulose Fibers segment (pulp mills, a liquid packaging board facility, and a printing papers joint venture) generated revenue of $420 million.
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 $484 million, up 56.1% year over year. It accounted for 28.3% of net sales.
Real Estate, Energy and Natural Resources: The segment’s revenue, accounting for 2.8% of net sales, were $48 million, up 118.2% from the year-ago tally.
Wood Products: The segment generated revenue (excluding intersegment sales) of $1,177 million, accounting for 68.9% of net sales. Compared with the year-ago quarter, the figure was up 15.1%.
Margins
In the quarter, Weyerhaeuser’s cost of sales increased 22.5% year over year, representing 76.9% of net sales compared with 79.2% in the year-ago quarter. Gross margin grew 230 basis points to 23.1%.
Selling, general and administrative expenses comprised 5.9% of net sales versus 5.8% in the year-ago quarter. Research and development expenses were $5 million, above $4 million in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) came in at $434 million, above $245 million in the year-ago quarter. EBITDA margin in the quarter was 25.4%.
Balance Sheet & Cash Flow
Exiting the third quarter, Weyerhaeuser’s cash and cash equivalents were $769 million, up from $485 million in the preceding quarter. Long-term debt decreased 21% sequentially to $6,329 million.
In the quarter, Weyerhaeuser generated net cash of $347 million from its operating activities, up 23% year over year. Capital spending increased 13.2% to $120 million.
During the quarter, Weyerhaeuser paid dividends worth $231 million and repurchased $374 million worth of shares.
Also, the company completed its $2 billion accelerated share repurchase program and closed the divestiture its liquid packaging business.
Outlook
For the fourth quarter, Weyerhaeuser anticipates sequentially higher earnings from the Timberland segment. While higher realizations and lower fee harvest volume will influence the results in the West, the impact of higher fee harvest volumes and lower silviculture expenses will impact results 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, Weyerhaeuser predicts sequentially lower earnings due to lower sales volume for most of the products and lower realizations for oriented strand board.
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 $22.7 billion, Weyerhaeuser currently carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the industry include Louisiana-Pacific Corp. (LPX - Free Report) , Norbord, Inc. and Trex Co. Inc. (TREX - Free Report) . While Louisiana-Pacific and Norbord sport a Zacks Rank #1 (Strong Buy), Trex Co. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific Corp.’s financial performance has been impressive, with an average positive earnings surprise of 53% for the last four quarters. Also, earnings estimates for 2016 and 2017 have been revised upward over the last 60 days.
Norbord has an average earnings surprise of 134.29%, while earnings estimates for 2016 and 2017 have been revised upward over the last 60 days. Trex Co. performed well in three of four trailing quarters, with an average positive earnings surprise of 8.11%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>