Weyerhaeuser Company (WY) reported earnings per share, before special items, of 35 cents in the second quarter 2013, way above just 9 cents earnings reported in the year-ago quarter. Results also surpassed the Zacks Consensus Estimate of 30 cents. Sequentially earnings rose roughly 35%.
Revenue
Weyerhaeuser’s net sales from continuing operations increased 19.4% year over year to $2,141 million. Result also surpassed the Zacks Consensus Estimate of $2,028 million.
Considering the segments, Timberland revenue increased 27.1% year over year to $333 million and accounted for 15.6% of the total revenue. Revenue from Wood Products was up 37.2% to $1,065 million and represented 49.7% of total revenue.
Revenue generated from Cellulose Fibers, roughly 22.2% of total revenue, increased 3.7% to $476 million, while Real Estate with about 12.5% of total revenue, increased 9.8% to $267 million.
Margins
Weyerhaeuser reported 9.8% year over year increase in its cost of sales for the second quarter, which as a percentage of revenue came in at 77.7%. Selling, general and administrative expenses were 7.6% of revenue and increased 14.1% over the year-ago quarter. Research and development expenses were about $8 million, flat year-over-year.
Operating income improved to $311 million versus $176 million in the second quarter of 2012. Margins in the quarter stood at 14.5%.
Balance Sheet
Exiting the second quarter of 2013, cash and cash equivalents (Forest Products and Real Estate) of Weyerhaeuser improved 42.7% to $912 million from $639 million in the previous quarter. Long-term debt remained stable sequentially at $3,951 million.
Cash Flow
Weyerhaeuser reported 40.1% year over year increase in its net cash flow from operating activities that came in at $374 million. Capital expenditure in the quarter went down 30.9% year over year to $47 million. Cash dividends paid in the quarter amounted to $109 million while share repurchase activities were nil in the quarter.
Outlook: For the third quarter of 2013, for the Timberlands segment, Weyerhaeuser's management anticipates that earnings would decline sequentially. Higher expected earnings from disposition of timberlands as well as higher volumes are likely to get offset by higher silviculture and road expenses, reduction in fee harvest and weak prices.
For the Wood Products segment, earnings are expected to decline sequentially. Selling prices are predicted to decline for lumber and oriented strand board. These will offset improved volume and lower costs.
For the Cellulose Fibers segment, Weyerhaeuser's management anticipates comparable earnings in the third quarter. Better selling prices and volumes and lower fiber and energy costs are likely to be offset by higher maintenance expenses.
For the Real Estate segment, Weyerhaeuser's management anticipates higher profits from single-family homebuilding operations. Home closings are expected to increase while selling expenses are likely to escalate.
Weyerhaeuser is one of the leading U.S. forest product companies, primarily engaged in growing and harvesting timber; manufacture, distribution, and sale of forest products; in addition to real estate development and construction.
The stock currently carries a Zacks Rank #3 (Hold). Weyerhaeuser's prime competitor Universal Forest Products Inc. (UFPI) reported an upbeat second quarter 2013 results on Jul 17. The company registered double-digits revenue growth in all five market segments while its adjusted earnings per share increased 17.9% year over year to 79 cents. Results were also above the Zacks Consensus Estimate of 72 cents.
Two other peer companies that are slated to release their earnings soon are Louisiana-Pacific Corp. (LPX) on Aug 6, 2013 and Plum Creek Timber Co. Inc. (PCL) on Jul 29, 2013.
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