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Weyerhaeuser's (WY) Q2 Earnings Top, Adjusted EBITDA Up Y/Y

Zacks Equity Research

Weyerhaeuser Company WY reported impressive second-quarter 2020 results, wherein earnings and revenues comfortably surpassed the Zacks Consensus Estimate. The company delivered strong performance across businesses despite COVID-19 impacts.

Devin W. Stockfish, president and chief executive officer of Weyerhaeuser said, “Entering the third quarter, U.S. housing activity is improving, but against a backdrop of rising COVID-19 infection rates and the rollback of certain economic reopening plans. We remain focused on operating safely and efficiently, effectively capitalizing on a full range of market conditions, and driving long-term value for our shareholders through disciplined, prudent capital allocation."

Inside the Headlines

The company reported adjusted earnings of 11 cents per share, which surpassed the consensus mark of 1 cent by a whopping 1000% but decreased 31.3% from the year-ago figure of 16 cents.

Weyerhaeuser Company Price, Consensus and EPS Surprise

Weyerhaeuser Company Price, Consensus and EPS Surprise
Weyerhaeuser Company Price, Consensus and EPS Surprise

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

Net sales of $1,631 million topped the consensus mark of $1,321 million by 24.4%. The reported figure however fell 3.6% from $1,692 million reported in the prior-year quarter.

Adjusted EBITDA came in at $386 million for the quarter, up 12.5% from $343 million in the year-ago period.

Segments Details

Timberlands: Net sales (including inter-segment sales of $121 million) in the segment came in at $480 million, down 9.8% from the year-ago figure of $532 million. Lower volumes and higher realizations for domestic and Japan export logs in the West, increased export costs, seasonally higher forestry and road spending, 4% reduced harvest volumes in the South, along with softness in fee harvest due to spring breakup impacted sales. Yet, improved China export volumes and realizations partially offset the negatives. Adjusted EBITDA came in at $140 million, down 20% from $175 million in the year-ago quarter.

Real Estate, Energy and Natural Resources: Segment’s net sales amounted to $65 million, down 19.8% from $81 million reported in the prior-year quarter owing to reduction in real estate acres sold and average price per acre. Adjusted EBITDA also fell 19.7% to $57 million from $71 million in the year-ago quarter.

Wood Products: Sales in the segment totaled $1,207 million, slightly down from $1,210 million in the prior-year quarter. Adjusted EBITDA came in at $198 million, up 54.7% from the year-ago figure of $128 million.  Market demand for wood products has been improving post April. Also, a 5% sequential increase in average sales realizations for lumber and improved manufacturing costs across all product lines supported the growth. This was partially offset by lower sales volumes across most of its product lines.

Financial Highlights

As of Jun 30, 2020, Weyerhaeuser had cash and cash equivalents of $643 million, up from $139 million at 2019-end. Long-term debt was $6,299 million at quarter-end versus $6,147 million at 2019-end.

Net cash from operations was $391 million during the quarter compared with $396 million in the year-ago period.

Outlook

For the third quarter, the company expects sequentially lower earnings and adjusted EBITDA in the Timberland segment. Geographically, in the West, the company expects lower average log sales realizations and seasonally higher road, forestry, and per unit logging and hauling costs. It anticipates sequentially higher average Western domestic log realizations, increased proportion of domestic log sales, but slightly lower export log realizations. In the South, it projects seasonally higher forestry expenses, decreased fee harvest volumes and slightly lower average log sales realizations, primarily due to mix.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates sequentially comparable earnings and adjusted EBITDA for the third quarter. For 2020, it expects adjusted EBITDA to be $235 million, up from $200 million expected earlier.

Within the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly higher on a sequential basis. It anticipates improved sales volumes across most of the product lines. Currently, third-quarter benchmark pricing for lumber and oriented strand board is much higher than the second quarter average.

Zacks Rank & Peer Release

Weyerhaeuser — which shares space with PotlatchDeltic Corporation PCH and Trex Company, Inc. TREX in the Zacks Building Products - Wood industry —  currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UFP Industries, Inc. UFPI reported impressive earnings for second-quarter 2020. Earnings and revenues not only surpassed the Zacks Consensus Estimate but also grew on a year-over-year basis, given greater-than-expected demand for home improvement products, as well as lower costs.

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