Weyerhaeuser Company (WY) is scheduled to report third-quarter 2014 results on Oct 31 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at 30 cents per share.
The company has performed above expectations in the last four trailing quarters, as evident from an average earnings surprise of +19.75%. In the quarter ending Jun 2014, Weyerhaeuser’s earnings of 40 cents per share surpassed the Zacks Consensus Estimate by 17.65%. Let's see how things are shaping up prior to this quarter’s announcement.
Factors to Influence Q3 Results
Weyerhaeuser’s Timberlands segment is likely to suffer from lower sales volume and log prices in the Western U.S., along with reduced export demand. Also, earnings in the South will be adversely impacted by higher silviculture and road costs, while earnings from disposition of non-strategic timberlands are predicted to decline.
In addition, third-quarter results will be impacted by lower earnings in the Cellulose Fibers segment due to planned maintenance works undertaken at the liquid packaging board facility and the pulp mill system. Realizations from lumber and oriented strand board are likely to fall in the quarter. Adverse foreign currency movements can also impact Weyerhaeuser’s profitability.
However, Weyerhaeuser’s efforts to capitalize on its core forest products-based businesses should prove beneficial in third-quarter 2014. Also, retirement of 50 million shares, associated with the divestiture of the real estate business, will improve earnings per share.
Earnings Whispers?
Our proven model does not conclusively show that Weyerhaeuser is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Weyerhaeuser currently has an ESP of -3.33% for third-quarter 2014. This is because the Most Accurate Estimate of 29 cents per share stands below the Zacks Consensus Estimate of 30 cents.
Zacks Rank: Weyerhaeuser’s Zacks Rank #3 (Hold), when combined with a -3.33% ESP, makes surprise predictions difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Other Stocks to Consider
Here are companies in the construction sector you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Hovnanian Enterprises Inc. (HOV), with an Earnings ESP of +15.00% and a Zacks Rank #2 (Buy).
KB Home (KBH), with an Earnings ESP of +3.92% and a Zacks Rank #3.
Continental Building Products, Inc. (CBPX), with an Earnings ESP of +11.11% and a Zacks Rank #3.
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