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Weyerhaeuser (WY) to Post Q4 Earnings: What's in the Offing?

Zacks Equity Research

Weyerhaeuser Company WY is all set to report fourth-quarter 2018 results on Feb 1, before the opening bell. The wood-based building products manufacturer delivered lower-than-expected results in two of the last four quarters, with the average negative earnings surprise being 5.8%. Moreover, in the last reported quarter, the company’s earnings and revenues missed the Zacks Consensus Estimate by 28.2% and 2.6%, respectively.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at 11 cents per share, trending downward over the past 30 days. This reflects a decrease of 64.5% from the year-ago earnings of 31 cents per share. Revenues are expected to be $1.8 billion, down 1.4% year over year.

Meanwhile, shares of Weyerhaeuser have declined 3% against its industry’s collective gain of 2.2% in the past three months.



 

Let’s See How Things are Shaping Up for This Announcement

Weyerhaeuser has been struggling with multiple headwinds of late. Severe weather conditions, uncertain Chinese trade policy, as well as unusually volatile markets for lumber and oriented strand board are expected to impact its fourth-quarter results.

For the Timberlands segment, accounting for 34.2% of revenues, Weyerhaeuser anticipates sequentially lower fourth-quarter earnings and adjusted EBITDA. In the West, results will likely suffer from increased unit-logging expenses and lower average sales realizations that are expected to be balanced by moderately higher export log sales volumes. In the South, fee harvest volumes are expected to be higher and average log sales realizations are likely to be comparable.

Weyerhaeuser’s Wood Products segment is strong, accounting for 70.5% of total net sales. At the segment, the company predicts considerably lower earnings and adjusted EBITDA on a sequential basis. Average sales realizations for lumber and oriented strand board are also expected to be lower than the third quarter.

For the Real Estate, Energy and Natural Resources segment, the company anticipates sequentially comparable earnings and adjusted EBITDA in the fourth quarter.

Overall, the company is highly focused on reducing controllable costs by improving reliability, enhancing product margins and maximizing the benefit of focused capital investment. Meanwhile, strong repair and remodeling activity, which drives about 40% of lumber demand, is expected to be beneficial for the company. Over the past nine months of 2018, repair and remodeling activity was up 7.5% from a year ago.

Meanwhile, Weyerhaeuser remains focused on operational excellence that includes merchandising for value, harvest and transportation efficiencies, along with flexing harvest to capture seasonal as well as short-term opportunities.

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company Price and EPS Surprise | Weyerhaeuser Company Quote

What Does the Zacks Model Say?

Our proven model does not conclusively show that Weyerhaeuser is likely to beat estimates in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.55%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Weyerhaeuser currently carries a Zacks Rank #5 (Strong Sell). Notably, we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some 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.

Taylor Morrison Home Corporation TMHC has an Earnings ESP of +25.00% and holds a Zacks Rank #3.

Forterra, Inc. FRTA has an Earnings ESP of +8.99% and carries a Zacks Rank #2.

Installed Building Products, Inc. IBP has an Earnings ESP of +0.31% and a Zacks Rank #3.

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