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Weyerhaeuser's (WY) Q4 Earnings Miss Estimates, Rise Y/Y

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Zacks Equity Research
·5 min read
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Weyerhaeuser Company WY reported fourth-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Both the metrics improved on a year-over-year basis. Notably, the company benefitted from low-cost performance in lumber along with operational improvements in its other businesses.

Meanwhile Devin W. Stockfish, president and chief executive officer of Weyerhaeuser stated, “As we embark on 2021, we are encouraged by the macroeconomic tailwinds that continue to bolster strong U.S. housing and repair and remodel markets, and we remain focused on creating value for shareholders through our unrivaled portfolio of assets, industry-leading operating performance and disciplined capital allocation."

Inside the Headlines

During the fourth quarter, the company reported adjusted earnings of 48 cents per share, missing the consensus mark of 49 cents by 2%. Nevertheless, the bottom line increased from the year-ago quarter’s figure of 3 cents.

Net sales during the quarter came in at $2,063 million, beating the consensus mark by 6.8%. Moreover, the figure rallied 33.3% from $1,548 million reported in the prior-year quarter.

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

During the fourth quarter, adjusted EBITDA came in at $657 million, up 152.7% from $260 million in the year-ago period.

Segments Details

Timberlands: Net sales (including inter-segment sales of $121 million) in the segment came in at $502 million, down 1.6% from the year-ago quarter’s figure of $510 million.

In the West, fee harvest volumes were up 9% sequentially as the company resumed operations following the wildfire activity (in the previous quarter). Moreover, the company witnessed sequential improvements in terms of average sales realizations for both domestic and Japan export logs. However, despite the sequential improvement, fee harvest volumes during the fourth quarter were down 5.8% on a year-over-year basis.

Meanwhile, in the South, fee harvest volumes dropped 16.7% year over year owing to lower realizations for fiber logs. However, this was partially offset by rise in average sawlog realizations. Overall, the company witnessed lower log sales volumes along with a fall in unit logging and hauling costs.

Adjusted EBITDA came in at $167 million, up 5.7% from $158 million in the year-ago quarter.

Real Estate, Energy and Natural Resources: During the fourth quarter, the segment’s net sales amounted to $30 million, down 34.8% year over year. Also, adjusted EBITDA came in at $23 million, down 37.8% year over year.

Wood Products: During the fourth quarter, the segment sales totaled $1,652 million, up 48.2% from $1,115 million in the prior-year quarter. Adjusted EBITDA came in at $530 million, up 381.8% from the year-ago quarter’s figure of $110 million. During the quarter, the company witnessed 27% sequential increase in average sales realizations for oriented strand board. This was partially offset by a 10 percent decline in average lumber sales realizations.

During the fourth quarter, sales volume declined on a sequential basis owing to rise in raw material costs primarily for Western and Canadian logs as well as oriented strand board webstock. Moreover, manufacturing costs increased for oriented strand board owing to planned maintenance outages.

Financial Highlights

As of Dec 31, 2020, Weyerhaeuser had cash and cash equivalents of $495 million, up from $139 million at 2019-end. Long-term debt was $5,325 million at quarter-end versus $6,147 million at 2019-end.

Net cash from operations was $444 million during the quarter compared with $292 million in the year-ago quarter.

Outlook

For first-quarter 2021, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment. In the West, the company expects lower average domestic log sales realizations and road spending coupled with higher unit logging and hauling costs. However, the company expects higher fee harvest volumes and comparable average log sales realizations in South.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates year over year earnings growth for the first quarter 2021. However, it expects Adjusted EBITDA to be modestly lower on a year-over-year basis owing to the timing and mix of real estate transactions. For 2021, it expects adjusted EBITDA to be $255 million.

Within the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly higher on a sequential basis. For the first quarter, the company expects improvement in manufacturing costs along with high sales volumes (primarily for lumber and engineered wood products).

Zacks Rank

Weyerhaeuser — which shares space with Louisiana-Pacific Corporation LPX, Norbord Inc. OSB and PotlatchDeltic Corporation PCH in the Zacks Building Products - Wood industry — currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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