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Weyerhaeuser's (WY) Growth Strategies Solid: Time to Buy?

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On Jul 18, Zacks Investment Research upgraded Weyerhaeuser Company (WY - Free Report) to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.

Year to date, Weyerhaeuser’s shares have yielded nearly 11% return, outperforming the gain of 9.01% recorded by the Zacks categorized Building Products industry.   

Why the Upgrade?

We believe that Weyerhaeuser stands to benefit from an improving housing market in the U.S. For 2017, the company projects housing starts to be roughly 1.25−1.30 million. To better serve its customers through improved products and services, it has planned capital spending of approximately $435 million for 2017. This, along with benefits anticipated from the company’s organic and inorganic growth prospects, make it a nice investment choice for investors seeking exposure in the building products industry.

Weyerhaeuser has undertaken some strategic decisions to help it concentrate on its core timber, land and forest products business. In 2016, the company divested its liquid packaging board business, printing papers company (North Pacific Paper Company) and Cellulose Fibers pulp mills. It continued its efforts in 2017 as well. In June, it signed a deal to divest its Uruguay-based timberlands and manufacturing business, including more than 300,000 acres of timberlands in north central and northeastern Uruguay, co-generation facility, plywood and veneer manufacturing facility, and a seedling nursery.

In addition, Weyerhaeuser’s cost-savings measures are likely to yield benefits of $95−$125 million in 2017. On a segmental basis, operating expense benefits will likely be in a $40−$50 million range for the Timberland segment, $55−$75 million for the Wood Products segment, including roughly $20−$25 million in OSB, $20−$25 million in lumber, $10−$15 million in engineered wood products and $5−$10 million in distribution.  

Over the last 60 days, the stock’s Zacks Consensus Estimate increased 1% to $1.02 for 2017. This represents year-over-year growth of 35.67%. Earnings are predicted to increase 5% in the next three to five years.  

Weyerhaeuser Company Price and Consensus

 

Weyerhaeuser Company Price and Consensus | Weyerhaeuser Company Quote

Other Stocks to Consider

Weyerhaeuser has a market capitalization of $25.1 billion. Other stocks worth considering in the building products industry include Louisiana-Pacific Corporation (LPX - Free Report) , Meritage Corporation (MTH - Free Report) and Trex Company, Inc. (TREX - Free Report) . While Louisiana-Pacific and Meritage Corporation sport a Zacks Rank #1, Trex Company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Louisiana-Pacific’s financial performance has been impressive, with an average positive earnings surprise of 5.39% in the last four quarters. Also, earnings estimates for 2017 have been revised upward, over the last 60 days.

Trex Company pulled off an average positive earnings surprise of 7.45% in the last four quarters. Its earnings estimates for 2017 and 2018 have been revised upward, over the last 60 days.

Meritage Corporation delivered a positive earnings surprise of 14.23% in the last quarter. Its earnings are predicted to grow 9.20% in the next three to five years.

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