A month has gone by since the last earnings report for Weyerhaeuser (WY). Shares have added about 0.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Weyerhaeuser due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Weyerhaeuser's Q2 Earnings Beat Estimates, Sales Miss
Weyerhaeuser reported mixed second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, while net sales missed the same.
The company’s reported earnings (before special items) of 16 cents topped the consensus mark of 10 cents by 60%. However, the bottom line was significantly down from the year-ago figure of 44 cents. The company has been facing volatility in various markets served and weather-related challenges.
Net sales during the quarter came in at $1,692 million, missing the consensus mark of $1,728 million by 2.1%. Also, the reported figure was down 18.1% from $2,065 million in the prior-year quarter. Its two major segments reported significantly lower net sales on a year-over-year basis.
The company currently operates through three business segments, namely Timberlands; Real Estate, Energy and Natural Resources; and Wood Products.
Timberlands’ (accounting for 23.7% of total net sales) net sales (including inter-segment sales of $131 million) during the quarter came in at $532 million, declining 13.5% from the year-ago figure of $615 million. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $175 million versus $240 million a year ago, reflecting a decline of 27.1%.
Net sales in Real Estate, Energy and Natural Resources (4.8%) were $81 million, increasing 39.7% from $58 million reported in the year-ago period. Adjusted EBITDA also grew an impressive 51.1% to $71 million from $47 million a year ago.
Sales from the Wood Products segment (71.5%) totaled $1,210 million, representing a fall of 21% from $1,531 million in the prior-year quarter. Adjusted EBITDA came in at $128 million, decreasing 66.8% from the year-ago figure of $385 million.
During the quarter, gross profit plunged more than 51% to $302 million from $618 million a year ago. Adjusted EBITDA was $343 million in the quarter, decreasing 46.2% from $637 million a year ago.
As of Jun 30, 2019, Weyerhaeuser had cash and cash equivalents of $212 million, down from $334 million at 2018-end. Long-term debt was $6,153 million versus $5,419 million at the end of 2018.
In the reported quarter, cash provided from operating activities was $396 million versus $597 million a year ago.
For the third quarter, the company expects sequentially lower earnings and adjusted EBITDA at the Timberland segment.
Geographically, in the West, seasonally lower harvest volumes, slightly higher road costs and average log sales realizations will likely affect its results. Average Southern log sales realizations are expected to be in line with the second quarter. In the South, seasonally higher forestry expenses will be largely offset by increased fee harvest volumes.
In the Real Estate, Energy and Natural Resources segment, it anticipates sequentially lower earnings and adjusted EBITDA in the third quarter. For full-year 2019, the segment’s adjusted EBITDA will be roughly $270 million.
In the Wood Products segment, it predicts comparable earnings and adjusted EBITDA on a sequential basis. Comparable sales volumes and slightly lower fiber costs will likely be offset by marginally higher unit manufacturing costs for engineered wood products.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -32.73% due to these changes.
At this time, Weyerhaeuser has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision 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.
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