Plum Creek Timber Co. Inc. (PCL), a real estate investment trust, is scheduled to report its fiscal 2011 second quarter earnings after the market closes on July 25, 2011. The current Zacks Consensus Estimate for the second quarter is 29 cents per share, representing a year-over-year increase of about 35.9%.
First Quarter Recap
Plum Creek reported fiscal 2011 first quarter earnings of $38 million or 23 cents per share, compared with $87 million or 54 cents in the year-earlier quarter. The first quarter 2011 earnings marginally missed the Zacks Consensus Estimate by a penny.
Total revenues for the quarter were $275 million compared with $317 million in the year-ago quarter. Total quarterly revenues exceeded the Zacks Consensus Estimate of $266 million.
With a considerable geographic diversity, Plum Creek was able to adjust its harvest plans during first quarter to capitalize on stronger markets and protect value in the weaker ones. Consequently, management was confident of meeting its earnings expectations for 2011.
Agreement of Analysts
In the last 7 days, 1 out of 11 analysts covering the stock raised his earnings estimate for the second quarter, while none of the analysts revised their earnings estimate downwards. For fiscal 2011, 1 out of 11 analysts covering the stock has increased the earnings estimate in the last 7 days, while none went for any decline. This represents that the analysts are a tad bullish about both the short- and long-term earnings prospects of the company.
Magnitude of Estimate Revisions
For the second quarter, earnings estimates have improved in the last 7 days by a penny to 29 cents. However, earnings estimates for fiscal 2011 have remained stagnant for the last 7 days at $1.33 per share. Plum Creek had earlier expected earnings in the range of 25-30 cents and $1.25-$1.45 per share for second quarter and full year 2011, respectively.
Our Recommendation
Plum Creek is the largest publicly-held timber REIT, and owns the largest and most geographically diversified private timberland in the U.S. This enables the company to benefit from large economies of scale. Plum Creek’s huge timber and land base provides excellent operational flexibility to respond to changing market conditions amid challenging macroeconomic environment.
In addition, the upsurge in demographic trends driving housing markets and demand for real estate properties across the nation provides a strong economic backdrop for the company to demonstrate solid financial performance in the future. The company is also likely to continue to defer harvest and sell-off non-core timber assets in order to fund its dividend and maintain significant liquidity. This defensive behavior seems appropriate given the company’s stated objective of maximizing long-term value and maintaining a stable dividend payout.
We currently have a ‘Neutral’ recommendation on Plum Creek, which presently has a Zacks #2 Rank that translates into a short-term ‘Buy’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank (short-term ‘Hold’) for Weyerhaeuser Co. (WY), a competitor of Plum Creek.
PLUM CREEK TMBR (PCL): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment