Plum Creek Timber Co. Inc (PCL), a real estate investment trust, is scheduled to report its fiscal 2011 first quarter earnings on April 25, 2011. The current Zacks Consensus Estimate for the first quarter is 24 cents per share, representing a year-over-year decline of about 49.1%.
Fourth Quarter Recap
Plum Creek reported fiscal 2010 fourth quarter earnings of $ 59 million or 37 cents per share, compared with $ 28 million or 17 cents in the year-earlier quarter. Excluding charges relating to early extinguishment of debt, recurring earnings for the quarter were 45 cents per share, which marginally exceeded the Zacks Consensus Estimate by a penny.
Total revenues for the quarter were $ 356 million compared with $ 258 million in the year-ago quarter. Total quarterly revenues were in line with the Zacks Consensus Estimate. For full year 2010, Plum Creek reported earnings of $ 213 million or $ 1.31 per share, compared with $ 236 million or $ 1.44 per share in 2009. Excluding non-recurring items, earnings for full year 2010 were $ 1.32 per share, in line with the Zacks Consensus Estimate.
Total revenues for fiscal 2010 were $ 1.19 billion compared with $ 1.29 billion for 2009. Total fiscal 2010 revenues were in line with the Zacks Consensus Estimate. All the operating segments of the company performed relatively well during the year and management further expects to benefit from an improving economy in 2011.
For full year 2010, Plum Creek generated $ 297 million of operating cash flow compared with $ 299 million in the year-ago period. At year-end 2010, the company had cash and cash equivalents of $ 252 million and total long-term debt of $ 1.6 billion, compared with cash and cash equivalents of $ 299 million and total long-term debt of $ 1.6 billion in 2009.
Guidance
For full year 2011, Plum Creek expects earnings in the range of $ 1.25 to $ 1.45 per share, while first quarter earnings are expected to be in the range of 20 cents to 25 cents.
Agreement of Analysts
In the last 7 days, none of the analysts revised their earnings estimate upwards for the first quarter, while one out of 13 analysts slashed his earnings estimate for fiscal 2011. In the last 30 days, one out of the 12 analysts covering the stock has reduced his earnings estimates for the first quarter and two out of the 13 analysts has reduced his fiscal 2011 estimates, while none went for any increment.
Magnitude of Estimate Revisions
Taking into account the analysts’ earnings revision, the Zacks Consensus Estimate for the first quarter and fiscal 2011 remained constant over the last 7 days. However, in the last 30 days the Zacks Consensus Estimate went down by a penny to $ 1.37 per share for fiscal 2011.
Our Recommendation
Plum Creek is the largest publicly-held timber REIT, and owns the largest and most geographically diversified private timberland in the U.S. This enables the company to benefit from large economies of scale. Plum Creek is approaching 2011 conservatively and expects a slow housing recovery.
Plum Creek’s business is affected by the cyclical nature of the forest products industry. In addition, prices for logs and manufactured wood products remain highly volatile. As such, factors beyond the direct control of the company undermine its long-term growth potential.
Plum Creek’s business is subject to strict environment policies, which have generally become more stringent in recent years. The company has to adhere to all the state laws and regulations and incur significant expenditures to minimize the adverse effect on the environment, failing which it could face severe penalties.
In the Real Estate segment, Plum Creek will see attractive prices for lower value properties, holding most of the valuable lands for the future and thereby manage the company for long term value creation.
We currently have a ‘Neutral’ recommendation on Plum Creek, which presently has a Zacks #4 Rank that translates into a short-term Sell rating. One of its competitors, Weyerhaeuser Co. (WY) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
PLUM CREEK TMBR (PCL): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
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