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Is Weyerhaeuser (WY) Poised to Beat Estimates in Q2 Earnings?

Zacks Equity Research
·5 mins read

Weyerhaeuser Company WY is slated to report second-quarter 2020 results on Jul 31, before the opening bell.

In the last-reported quarter, the company’s earnings and revenues surpassed the respective the Zacks Consensus Estimate by 28.6% and 3.5%. On a year-over-year basis, earnings and revenues increased 63.6% and 3.5%, respectively, on growth in the Wood Products segment.

Notably, Weyerhaeuser’s earnings topped the consensus mark in two of the last four quarters while missing in the other two, the average surprise being 2.9%.

Estimate Revision Scenario

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at a cent per share over the past 30 days. This indicates a 93.8% decline from the year-ago earnings of 16 cents per share. The consensus mark for revenues is at $1.32 billion, suggesting a 21.9% year-over-year drop.

Weyerhaeuser Company Price and EPS Surprise

 

Weyerhaeuser Company Price and EPS Surprise
Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote

Factors to Note

Weyerhaeuser’s second-quarter earnings and sales are expected to have been hit by disruptions caused by the coronavirus outbreak. As the company’s performance is highly associated with the housing market, the pandemic disrupted momentum during the second quarter. While residential construction has been designated an essential industry in most jurisdictions, the impact of stay-at-home orders and general economic uncertainty on potential homebuyers translated into significant slowdown in housing activity in late March and throughout April. This is reflected in the company's updated guidance (as highlighted in first-quarter earnings call), which projects reduced harvests and real estate sales.

Nonetheless, increasing lumber pricing and solid demand for new housing across the United States from May have likely helped Weyerhaeuser to some extent in the entire mix of businesses, including lumber, OSB and timber.

As provided during the first-quarter earnings call, the company expects sequentially lower earnings and adjusted EBITDA in the Timberland segment (contributing nearly 25% to company’s revenues) for the second quarter. Geographically, in the West, the company expects lower realizations, comparable domestic log sales volumes, and seasonally higher road and forestry costs to be partially offset by higher sales volumes for China export logs. A significant decrease in demand for sawlogs prompted the company to lower expectation for fee harvest volumes in the U.S. South. Management does not anticipate major changes in planned harvest volumes in the West.

The Zacks Consensus Estimate for Timberland segment is pegged at $474 million, implying a 5.8% decline from first-quarter 2020.

For the Wood Products segment (contributing 70% to company’s revenues), the company predicts a substantial decline in earnings and adjusted EBITDA on a sequential as well as year-over-year basis. It anticipates significantly lower sales volumes across all product lines. In response to deteriorating market conditions owing to the COVID-19 outbreak, it has been adjusting production volumes across facilities manufacturing wood products to align with customer demand.

The Zacks Consensus Estimate for the Wood Products segment is pegged at $1,090 million, implying an 11.7% sequential decline.

For the Real Estate, Energy and Natural Resources segment (contributing almost 5% to company’s revenues), Weyerhaeuser anticipates earnings and adjusted EBITDA to decline $20 million from a year ago due to fewer real estate acres sold.

The Zacks Consensus Estimate for Real Estate, Energy and Natural Resources segment is pegged at $58 million, implying a 48.2% sequential decline.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Weyerhaeuser this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Weyerhaeuser has an Earnings ESP of +125.01%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

TopBuild Corp. BLD has an Earnings ESP of +29.11% and holds a Zacks Rank #1.

Foundation Building Materials, Inc. FBM has an Earnings ESP of +28.57% and carries a Zacks Rank #3.

KBR, Inc. KBR has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

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