Weyerhaeuser Company WY reported lower-than-expected earnings for first-quarter 2015. Adjusted earnings came in at 19 cents per share, below the Zacks Consensus Estimate of 27 cents. Also, the bottom line fell short of the year-ago tally of 24 cents per share.
The year-over-year decline was due to a fall in revenues and increase in cost of sales. Moreover, the bottom line was adversely impacted by 4 cents per share of foreign currency translations.
Including one-time items, Generally Accepted Accounting Principles (“GAAP”) earnings in the quarter were 17 cents per share.
Revenues
Weyerhaeuser generated net sales of $1,721 million in the quarter, down 0.9% year over year and below the Zacks Consensus Estimate of $1,773 million.
Weyerhaeuser reports its revenues under the following segments:
Revenues from the Timberland segment fell 6.9% year over year to $351 million. It accounted for 20.4% of net sales.
The Wood Products segment generated revenues of $923 million, up 2.8% year over year and representing 53.6% of net sales.
The Cellulose Fibers segment’s revenues declined 3% year over year to $447 million, representing 26% of net sales.
Margins
Weyerhaeuser’s cost of sales grew 1.8% year over year, accounting for 80.5% of total revenue versus 78.4% in the year-ago quarter. Selling, general and administrative expenses were 5.9% of total revenue, decreasing from 6.7% in the prior-year quarter. Research and development expenses stood at about $5 million as against $7 million in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $333 million versus $372 million in the year-ago quarter. EBITDA margin in the quarter was 19.3%.
Balance Sheet
Exiting first-quarter 2015, Weyerhaeuser had cash and cash equivalents of $1,158 million versus $1,580 million in the preceding quarter. Long-term debt was flat at $4,891 million.
Cash Flow
In the quarter, Weyerhaeuser generated net cash of $77 million from its operating activities, down from $109 million in the year-ago quarter. Capital spending increased 39.2% to $71 million.
During the quarter, the company paid dividend worth $152 million and repurchased $253 million of shares.
Outlook: For second-quarter 2015, Weyerhaeuser anticipates sequentially lower earnings from the Timberland segment. Realizations on Western log will be lower, while earnings from disposition of non-strategic timberlands will decline.
For the Wood Products segment, sequentially higher earnings are expected to be driven by higher sales and volumes of all products, as well as better realization for lumber and oriented strand board.
For the Cellulose Fibers segment, management projects sequentially lower earnings due to reduced pulp sales realizations and higher maintenance expenses.
With a market capitalization of $16.5 billion, Weyerhaeuser currently carries a Zacks Rank #5 (Sell). Better-ranked stocks in the industry include Comfort Systems USA Inc. FIX, Watsco Inc. WSO and Universal Forest Products Inc. UFPI. While Comfort Systems USA sports a Zacks Rank #1 (Strong Buy), both Watsco and Universal Forest Products hold a Zacks Rank #2 (Buy).
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