We are changing our recommendation for Plum Creek Timber Co. (PCL) from Neutral to Outperform. Plum Creek is the largest publicly-held timber REIT, with a diversified timber and land base that enables it to benefit from large economies of scale.
Plum Creek reported strong second quarter 2012 results with earnings beating the Zacks Consensus Estimate by $0.04. In addition, the upsurge in demographic trends driving housing markets and demand for real estate properties across the country provides a strong economic backdrop for the company to demonstrate solid financial performance in the future.
Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $51.00, 45.9X 2012 EPS, reflects this view.
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