Zacks Investment Research downgraded premium lumber and woods company Weyerhaeuser Co. WY to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold) on Jan 8, 2016. Going by the Zacks model, stocks carrying a Zacks Rank #4 are likely to underperform the broader market over the next few quarters.
Why on Sell?
Weyerhaeuser constantly attempts to widen the scope of its business on the back of higher degree of internationalization. However, greater foreign exposure renders the company vulnerable to risks associated with external headwinds such as unfavorable foreign currency translation. Moreover, the company faces stiff competition from North American and global producers who have greater financial resources and lower production costs.
In addition, Weyerhaeuser’s Timberlands and Wood Products segments are highly dependent on the U.S. housing market. Any untoward situations influencing the construction and housing sectors would also impact the company's financials. Further, if unchecked, the firm’s proliferating debt levels would prove detrimental to its profitability in the near future.
Taking into account the above negatives, the company anticipates weaker earnings from its Wood Products and Cellulose Fibers segments in fourth-quarter 2015. This might also weigh on its aggregate bottom-line results in the to-be-reported quarter.
Stocks to Consider
Better-ranked stocks in the industry include Louisiana-Pacific Corp. LPX, Albany International Corp. AIN and Astec Industries, Inc. ASTE. All three stocks hold a Zacks Rank #2 (Buy).
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