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Weyerhaeuser to Sell Montana Timberland, Optimize Portfolio

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Weyerhaeuser Company WY has inked a deal with a private timberland investment company to sell its 630,000 acres of Montana timberland for $145 million in cash. This divestiture is part of the company’s ongoing initiatives to strategically optimize the timberlands portfolio.

The transaction, which is slated to close in second-quarter 2020, is subject to customary closing conditions. The deal includes a diverse mix of softwood species and an existing 110,000-acre conservation easement that preserves public access in perpetuity. The company expects minimal tax liability related to the transaction.

The firm noted that its three manufacturing facilities in Montana will not be affected by the announcement.

Will Strategic Initiatives Boost Weyerhaeuser’s Performance?

Weyerhaeuser remains focused on operational excellence that includes merchandising for value, harvest and transportation efficiencies, along with flexing harvest to capture seasonal and short-term opportunities. Also, the initiative focuses on optimizing silviculture spend, reducing growth costs, and improving log and hauling efficiencies across all geographies.

However, the company is witnessing volatility in various markets served and weather-related challenges. During the third quarter, it reported earnings (before special items) of 8 cents, which was significantly down from the year-ago figure of 28 cents. Also, its two major segments reported significantly lower net sales on a year-over-year basis.

Particularly in the Timberlands, reduction in average sales realizations for domestic and export logs, and seasonally lower domestic sales volumes in the West resulted in 10.9% year-over-year decline in net sales. For the fourth quarter, the company expects sequentially comparable earnings but marginally lower adjusted EBITDA at the Timberland segment.

Shares of Weyerhaeuser have gained 13.8%, comparing unfavorably with its industry's 16% rally. Nonetheless, the company's earnings in 2020 are expected to witness an impressive 92.9% year-over-year growth. Its focus on operational excellence and improving housing market fundamentals is likely to drive performance going forward.

Zacks Rank

Weyerhaeuser — which shares space with Universal Forest Products, Inc. UFPI, Louisiana-Pacific Corporation (LPX - Free Report) and Trex Company, Inc. TREX in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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