Weyerhaeuser Company (WY) reported earnings per share, before special items, of 27 cents in the third quarter 2013, above 22 cents earned in the year-ago quarter. Results also surpassed the Zacks Consensus Estimate of 21 cents. Sequentially earnings fell 22.9%.
Revenue
Weyerhaeuser’s net sales generated in the quarter increased 23.1% year over year to $2,181 million. Results also surpassed the Zacks Consensus Estimate of $2,035 million.
Considering the segments, Timberland revenue increased 32.2% year over year to $353 million and accounted for 16.2% of the total revenue. Revenue from Wood Products was up 26.2% to $1,030 million and represented 47.2% of total revenue.
Revenue generated from Cellulose Fibers, roughly 21.7% of total revenue, increased 3.3% to $474 million, while Real Estate with about 14.9% of total revenue, increased 40.9% to $324 million.
Margins
Weyerhaeuser reported 21.3% year over year increase in its cost of sales for the third quarter, which as a percentage of revenue came in at 79.2%. Selling, general and administrative expenses were 7.7% of revenue and increased 7.7% over the year-ago quarter. Research and development expenses were about $8 million, flat year over year.
Operating income improved to $277 million versus $202 million in the third quarter of 2012. Margins in the quarter stood at 12.7%.
Balance Sheet
Exiting the third quarter of 2013, cash and cash equivalents (Forest Products and Real Estate) of Weyerhaeuser was down 1% to $903 from $912 million in the previous quarter. Long-term debt was at $5,568 million, up 40.9% sequentially.
Cash Flow
Weyerhaeuser’s cash generation from operating activities more than doubled and came in at $343 million. Capital expenditure declined 8% year over year to $69 million. Cash dividends paid in the quarter amounted to $128 million while share repurchase activities were nil in the quarter.
Outlook: For the fourth quarter of 2013, for the Timberlands segment, Weyerhaeuser’s management anticipates comparable earnings sequentially. Better log prices and higher fee harvest volumes will drive results in the West while higher volumes will partially offset higher silviculture expenses. Lower earnings are anticipated from disposition of timberlands.
For the Wood Products segment, earnings are expected to decline sequentially due to volume declines and higher loss costs.
For the Cellulose Fibers segment, management of Weyerhaeuser anticipates higher earnings sequentially. Better pulp sales realizations, lower chemical costs, and lower maintenance expenses will drive results.
For the Real Estate segment, 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).
Other stocks to watch out for in the industry are Universal Forest Products Inc. (UFPI) with a Zacks Rank #1 (Strong Buy) while Boise Cascade Company (BCC) and Rayonier Inc. (RYN), each come with a Zacks Rank #2 (Buy).
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