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Weyerhaeuser (WY) to Report Q3 Earnings: What's in Store?

Zacks Equity Research

Weyerhaeuser Company WY is slated to report third-quarter 2019 results on Oct 25, before the opening bell.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 60% but revenues missed the same by 2.1%. On a year-over-year basis, earnings of 16 cents per share were significantly down from the year-ago figure of 44 cents due to volatility in various markets served and weather-related challenges. Net sales of $1,692 million also decreased 18.1% from $2,065 million a year ago, thanks to lower contribution from its two major segments — Timberlands and Wood Products.

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 has decreased to 10 cents from 12 cents per share over the past 30 days. The estimated figure indicates a 64.3% decrease from the year-ago reported figure of 28 cents per share. Net sales are expected to be $1.67 billion, suggesting a 12.8% year-over-year decline.

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote

Factors to Consider

Weyerhaeuser’s third-quarter earnings and sales are expected to have decreased owing to continued deterioration in OSB and lumber prices. Despite focusing on operational excellence, which entails merchandising for value, harvest and transportation efficiency, and flexing harvest to capture seasonal and short-term opportunities, the company’s exposure to raw material price fluctuations is likely to have dented profits in the to-be-reported quarter.

That said, rebounding housing market indicators like new and existing home sales, building permits, as well as housing starts are expected to have showed strength in the third quarter, supposedly offsetting the above-mentioned headwinds.

For the Wood Products segment (accounting for 71.5% of total net sales), the company expects comparable earnings and adjusted EBITDA on a sequential basis. Comparable sales volumes and slightly lower fiber costs are likely to have been offset by marginally higher unit manufacturing costs for engineered wood products.

Management expects sequentially lower earnings and adjusted EBITDA at the Timberland segment (accounting for 23.7% of total net sales), the second-largest contributing segment. Geographically, in the West, seasonally lower harvest volumes, slightly higher road costs and average log sales realizations are likely to have affected its third-quarter earnings. Average Southern log sales realizations are expected to be in line with the second quarter. In the South, seasonally higher forestry expenses are likely to have been largely offset by increased fee harvest volumes.

For the Real Estate, Energy and Natural Resources segment (accounting for 4.8% of total net sales), Weyerhaeuser anticipates sequentially lower earnings and adjusted EBITDA for the third quarter.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Weyerhaeuser this time around. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive surprise. This is not the case here, as you will see below.

Earnings ESP: Weyerhaeuser has an Earnings ESP of -1.72%. 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

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.

Floor & Decor Holdings, Inc. FND has an Earnings ESP of +0.78% and a Zacks Rank #3.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +2.20% and holds a Zacks Rank #2.

Martin Marietta Materials, Inc. MLM has an Earnings ESP of +1.77% and carries a Zacks Rank #2.

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