Weyerhaeuser (WY) Down 7.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Weyerhaeuser (WY). Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Weyerhaeuser due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Weyerhaeuser's Q1 Earnings & Revenues Surpass Estimates

Weyerhaeuser Company reported first-quarter 2020 results, wherein earnings and revenues surpassed the respective the Zacks Consensus Estimate. The company reported adjusted earnings of 18 cents per share, which beat the consensus mark of 14 cents by 28.6% and increased 63.6% from the year-ago figure of 11 cents.

Net sales during the quarter amounted to $1,728 million, beating the consensus mark of $1,670 million by 3.5%. The reported figure also grew 5.2% from $1,643 million reported in the prior-year quarter on the back of growth of the Wood Products segment.

Segments Details

The company currently operates through three business segments — Timberlands; Real Estate, Energy and Natural Resources; and Wood Products.

Timberlands’ net sales (including inter-segment sales of $122 million) during the quarter came in at $503 million, down 9.5% from the year-ago figure of $556 million. Higher average domestic sales realizations, and increased average sales realizations and volumes for Japan export logs in the West were offset by lower fee harvest volumes and average log sales realizations in the South.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $173 million, down 10.4% from $193 million in the year-ago quarter.

Net sales in Real Estate, Energy and Natural Resources amounted to $112 million, down 5.1% from $118 million reported in the prior-year quarter owing to higher number of acres sold. Adjusted EBITDA also fell 4.7% to $101 million from $106 million in the year-ago quarter.

Sales in the Wood Products segment totaled $1,235 million, up 12.9% from $1,094 million in the prior-year quarter. Adjusted EBITDA came in at $184 million, up 60% from the year-ago figure of $115 million. The improvement was due to increased average sales realizations for lumber and oriented strand board, as well as higher sales volumes across all product lines.

Operating Highlights

Adjusted EBITDA was $413 million in the quarter, up 13.2% from $365 million in the year-ago period.

Financial Highlights

As of Mar 31, 2020, Weyerhaeuser had cash and cash equivalents of $1,458 million, up from $139 million at 2019-end. Long-term debt was $6,299 million at the end of the quarter versus $6,147 million at 2019-end.

Net cash from operations was $86 million at the end of the quarter versus $14 million cash used in operations.

Q2 Outlook

For the second quarter, the company expects sequentially lower earnings and adjusted EBITDA in the Timberland segment.

Geographically, in the West, the company expects lower realizations, comparable domestic log sales volumes, and seasonally higher road and forestry costs to be partially offset by higher sales volumes for China export logs. In the South, the company anticipates lower fee harvest volumes and slightly lower average log sales realizations. In order to align harvest volumes with reduced sawlog demand, the company reduced full-year Southern fee harvest by 10% from the prior view. The company does not anticipate material changes in Western fee harvest volumes.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates earnings and adjusted EBITDA to decline $20 million from a year ago due to fewer real estate acres sold. The company now expects 2020 adjusted EBITDA for the segment to be $200 million, as social distancing and other measures have curtailed real estate broker activity and lengthened the time required to finance, close, and record transactions.

In the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly down on a sequential as well year-over-year basis. It anticipates significantly lower sales volumes across all product lines. In response to deteriorating market conditions owing to the COVID-19 outbreak, it has been adjusting production volumes across wood products manufacturing facilities to align with customer demand.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -200% due to these changes.

VGM Scores

At this time, Weyerhaeuser has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Weyerhaeuser has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Weyerhaeuser Company (WY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research