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Weyerhaeuser Reaches a New 52-Week High on Solid Q2 Earnings

Zacks Equity Research

Shares of Weyerhaeuser Company (WY) scaled a new 52-week high of $34.51 during its trading session on Aug 25. The new apex represents a slight increase over the previous high of $34.42 reached on Aug 21, 2014.
Weyerhaeuser Company closed the session at $34.46, reflecting a year-to-date return of 10.8%. The trading volume for the session was roughly 1.9 million shares. Earnings estimate revisions for 2014 and an expected earnings growth rate of 5% for the next five years, indicate further upward potential for this company.

Growth Drivers

Weyerhaeuser’s share price has risen by 10.3% since Aug 1, clearly reflecting investors’ confidence in the recovering U.S. housing market. Housing starts are expected to increase in 2014 and 2015, while export businesses are likely to flourish in the quarters ahead.

Also, the company’s second-quarter earnings of 40 cents per share were up 21.2% year over year and above the Zacks Consensus Estimate of $0.34. Revenues grew 4.8% on the back of healthy performance in the Timberland, Wood Products and Cellulose Fibers segments.

In Jul 2014, Weyerhaeuser completed the divestiture of its real estate business, WRECO, to TRI Pointe Homes, Inc. (TPH). The divested assets contributed $317 million in revenues, while 50 million shares have been retired in connection with the transaction. Going forward, management intends to capitalize on its core forest products-based businesses.

In addition, Weyerhaeuser recently received its board of directors’ approval for an increase of 32% or 7 cents in the quarterly dividend rate and a $700 million share buyback program. The twin news indicates the healthy cash position of the company and its commitment towards enhancing shareholders’ return.

Estimate Revisions Show Potency

In the last 30 days, the Zacks Consensus Estimate for Weyerhaeuser has climbed 2.3% to $1.36 for 2014, reflecting year-over-year growth of 18.9% for 2014.

In addition, the company has an Earnings ESP of +1.47% for 2014, indicating the extent by which the Most Accurate Estimate of $1.38 has surpassed the Zacks Consensus Estimate of $1.36.

With a market capitalization of $18.2 billion, Weyerhaeuser currently carries a Zacks Rank #3 (Hold). Other stocks worth considering in the building products industry include Boise Cascade Company (BCC) and The Home Depot, Inc. (HD), each holding a Zacks Rank #2 (Buy).

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Read the Full Research Report on TPH

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