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Plum Creek Q1 Earnings Beat Ests

Zacks Equity Research

Plum Creek Timber Company Inc. (PCL) reported first-quarter 2014 earnings of 17 cents per share, 2 cents ahead of the Zacks Consensus Estimate. Results reflect higher log prices and added harvest volumes from its recent timberlands acquisition.

However, the results were significantly below (down 18 cents) the prior-year quarter earnings of 35 cents per share. This unfavorable year-over-year comparison was due to 21 cents per share benefit experienced in the prior year quarter from the sale of a large non-strategic timberland.

Moreover, for the first quarter, total revenue fell 6.8% year over year to $317 million and missed the Zacks Consensus Estimate of $326 million.

Segment Performance in Q1

Northern Resources – This segment reported operating profit of $16 million during the quarter, up 45.5% year over year. Solid demand from both export markets and domestic lumber mills drove a $9 per ton increase in sawlog prices while pulpwood prices remained stable. Overall, harvest volume was similar to the prior year quarter level.

Southern Resources – This segment booked an operating profit of $31 million, up about 29.2% year over year. The rise came on the back of higher harvest volumes and increased log prices. The company experienced a 16% increase in harvest volumes for both sawlogs and pulpwood owing to the recent acquisition of lands in the South. Average sawlog prices moved up 6% while Pulpwood prices increased around 7% year over year.

Real Estate – This segment generated operating profit of $12 million, down 73.3% year over year. This unfavorable year-over-year comparison is due to the inclusion of a $53 million sale of large non-strategic timberlands in the 2013 results. In the reported quarter, the company sold around 3,000 acres of small, non-strategic timberlands, 4,000 acres of HBU/recreation lands and about 3,400 acres of conservation lands.

Manufacturing – This segment posted an operating profit of $9 million in the quarter, down 10.0% year over year. Though the company experienced a rise in lumber sales volumes (up 24% from the prior year), the decrease in plywood sales volume (down 17%) offset the positive as a result of severe weather conditions. Moreover, lumber and plywood prices were similar to the prior-year quarter level though MDF prices reported a 6% rise from the prior year.

Energy and Natural Resource – This segment booked an operating profit of $6 million, up 20.0% year over year. This was driven by additional construction material and coal royalties from acquisitions in 2013.


Plum Creek ended first-quarter 2014 with $104 million in cash and cash equivalents, down from $433 million at the prior-year end. Total long-term debt stood at $2.4 billion, unchanged from the year-end 2013.


Plum Creek has reiterated its outlook for 2014 and expects it to be in the range of $1.30–$1.50. The Zacks Consensus Estimate of $1.38 per share also falls within this range.

For second-quarter 2014, earnings are projected to be in the range of 27–32 cents per share. The Zacks Consensus Estimate of 28 cents per share lies within this range.

Also, Plum Creek expects total harvest volume to be in the range of 20–21 million tons in 2014. In the second quarter, harvests levels are anticipated to experience a seasonal decline to their lowest level of the year in the Northern Resources segment while harvest volumes are expected to rise in the Southern Resources segment.

Real Estate segment sales are expected to be between $240 million – $280 million in 2014 and $60 million – $80 million in the second quarter. Additionally, in the rest of the year, Manufacturing segment’s earnings are projected to increase.

Our Viewpoint

While we believe that the company’s Southern Timberland buyout from MeadWestvaco Corporation (MWV) holds good for Plum Creek’s long-term growth, the cyclical nature of the business and stiff competition remain our concerns for this Zacks Rank #4 (Sell) stock.

We now look forward to the results of other REIT stocks that are scheduled to release first-quarter 2014 results this week. These include Boston Properties Inc. (BXP) and Equity Residential (EQR).

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