Here's Why Rayonier (RYN) is an Apt Portfolio Pick for Now
Rayonier Inc. RYN is well-poised to benefit from its timberland portfolio positioned in some of the most productive timber-growing regions of the United States South, the Pacific Northwest and New Zealand.
Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for the company’s 2024 earnings per share indicates a favorable outlook as it has been revised 2.1% upward in the past month to 48 cents.
Over the past three months, RYN’s shares have gained 0.5% compared with the industry's upside of 6.7%. Given the strength in its fundamentals, the stock is poised for growth and any dip can offer a good entry point.
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Factors That Make Rayonier a Solid Pick
Geographical diversity & Favorable Demand-Supply Dynamics: Rayonier has emerged as the leading “Pure Play” timber REIT, generating 74% of its 5-Year average EBITDA from timber operations, compared with 27% for the peer group over the last five years. As of Dec 31, 2023, its portfolio included 1.85 million acres in the U.S. South, 418,000 acres in the U.S. Pacific Northwest and 421,000 gross acres in New Zealand.
Over the last several years, lumber production and capacity in the U.S. South have grown considerably. With roughly 71% of Rayonier’s Southern timberlands located in the top quartile markets, the company is well-poised to benefit from the favorable trend. Although the domestic and export markets are likely to witness softer demand in the near term, construction activity in these markets is expected to pick up pace in the upcoming period, driving pricing for the Pacific Northwest segment. We expect a year-over-year rise of 2.5% in adjusted EBITDA in 2024.
HBU Development: Rayonier constantly strives to find alternative uses of the timberlands for higher-and-better-use (HBU) and there are many attractive HBU opportunities across the U.S. South, mainly in the Florida and Georgia coastal corridor. The company remains focused on unlocking the long-term value of its HBU development and rural property portfolio in its Real Estate segment.
Development in Biogenetics & Cloning: This Timberland REIT’s business has significantly benefited from the developments in the field of biogenetics and cloning that have led to faster growth in trees, thus ensuring proper sizes for maximum extraction of wood.
Balance Sheet Strength: Rayonier maintains a healthy balance sheet. It exited the fourth quarter of 2023 with $207.7 million of cash and cash equivalents. As of Dec 31, 2023, the company had $269.7 million available for issuance under its at-the-market program. Its current credit ratings of BBB-/Stable from S&P and Baa3/Stable from Moody’s enable favorable access to the debt market.
Rayonier’s investment-grade credit profile, significant asset coverage and ample financial flexibility poise it well to capitalize on future growth opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are Host Hotels & Resorts HST and Iron Mountain IRM, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HST’s 2024 funds from operations (FFO) per share is pegged at $1.97, suggesting year-over-year growth of 2.6%.
The Zacks Consensus Estimate for IRM’s 2024 FFO per share stands at $4.42, indicating an increase of 7.3% from the year-ago quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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