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Weyerhaeuser's (WY) Q2 Earnings Beat Estimates, Sales Miss

Zacks Equity Research

Weyerhaeuser Company WY 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.

Weyerhaeuser Company Price, Consensus and EPS Surprise

Weyerhaeuser Company Price, Consensus and EPS Surprise

Weyerhaeuser Company price-consensus-eps-surprise-chart | Weyerhaeuser Company Quote

Segments Details

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.

Operating Highlights

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.

Financial Highlights

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.

Q3 Guidance

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.

Zacks Rank

Currently, Weyerhaeuser — which shares space with Louisiana-Pacific Corporation LPX and Trex Company, Inc. TREX in the Zacks Building Products - Wood industry — carries a Zacks Rank #4 (Sell).

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

Peer Release

Universal Forest Products, Inc. UFPI reported better-than-expected earnings in the second quarter of 2019. The company’s earnings of 88 cents per share topped the consensus estimate of 83 cents by 6% and increased 23.9% from 71 cents reported in the year-ago period. However, net sales of $1.24 billion declined 4% on a year-over-year basis. Lower lumber prices and 9% reduction in selling prices significantly impacted gross sales.

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