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It has been about a month since the last earnings report for Weyerhaeuser (WY). Shares have added about 2.6% 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 (WY) Q4 Earnings Miss Estimates, Rise Y/Y
Weyerhaeuser Company reported fourth-quarter 2020 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same. Both the metrics improved on a year-over-year basis. Notably, the company benefited from low-cost performance in lumber and operational improvement in other businesses.
Meanwhile Devin W. Stockfish, president and chief executive officer of Weyerhaeuser stated, “As we embark on 2021, we are encouraged by the macroeconomic tailwinds that continue to bolster strong U.S. housing and repair and remodel markets, and we remain focused on creating value for shareholders through our unrivaled portfolio of assets, industry-leading operating performance and disciplined capital allocation."
Inside the Headlines
For the fourth quarter, the company reported adjusted earnings of 48 cents per share, missing the consensus mark of 49 cents by 2%. Nevertheless, the bottom line increased from the year-ago figure of 3 cents per share.
Net sales for the quarter came in at $2,063 million, beating the consensus mark by 6.8%. Moreover, the figure rallied 33.3% from $1,548 million reported in the prior-year quarter. For the fourth quarter, adjusted EBITDA came in at $657 million, up 152.7% from $260 million in the year-ago period.
Timberlands: Net sales (including inter-segment sales of $121 million) in the segment came in at $502 million, down 1.6% from the year-ago figure of $510 million.
In the West, fee harvest volumes were up 9% sequentially as the company resumed operations following the wildfire activity (in the previous quarter). Moreover, it witnessed sequential improvements in terms of average sales realizations for both domestic and Japan export logs. However, despite the sequential improvement, fee harvest volumes for the fourth quarter were down 5.8% on a year-over-year basis.
Meanwhile, in the South, fee harvest volumes dropped 16.7% year over year owing to lower realizations for fiber logs. However, this was partially offset by a rise in average sawlog realizations. Overall, the company witnessed lower log sales volumes, along with a fall in unit logging and hauling costs.
Adjusted EBITDA came in at $167 million, up 5.7% from $158 million in the year-ago quarter.
Real Estate, Energy and Natural Resources: For the fourth quarter, the segment’s net sales amounted to $30 million, down 34.8% year over year. Also, adjusted EBITDA came in at $23 million, down 37.8% year over year.
Wood Products: For the fourth quarter, the segment sales totaled $1,652 million, up 48.2% from $1,115 million in the prior-year period. Adjusted EBITDA came in at $530 million, up 381.8% from the year-ago figure of $110 million. During the quarter, the company witnessed a 27% sequential increase in average sales realizations for oriented strand board. This was partially offset by a 10% decline in average lumber sales realizations.
For the fourth quarter, sales volume declined on a sequential basis owing to a rise in raw material costs — primarily for Western and Canadian logs — as well as oriented strand board webstock. Moreover, manufacturing costs increased for oriented strand board owing to planned maintenance outages.
As of Dec 31, 2020, Weyerhaeuser had cash and cash equivalents of $495 million, up from $139 million at 2019-end. Long-term debt was $5,325 million at quarter-end versus $6,147 million at 2019-end. Net cash from operations was $444 million for the quarter compared with $292 million in the year-ago period.
For first-quarter 2021, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment. In the West, the company expects lower average domestic log sales realizations and road spending, coupled with higher unit logging and hauling costs. However, the company expects higher fee harvest volumes and comparable average log sales realizations in South.
In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates year-over-year earnings growth for first-quarter 2021. However, it expects Adjusted EBITDA to be modestly lower on a year-over-year basis owing to the timing and mix of real estate transactions. For 2021, it expects adjusted EBITDA to be $255 million.
Within the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly higher on a sequential basis. For the first quarter, it expects improvement in manufacturing costs along with high sales volumes (primarily for lumber and 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 -12.73% due to these changes.
At this time, Weyerhaeuser has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 B. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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