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Why Is Rayonier (RYN) Down 0.1% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Rayonier (RYN). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rayonier due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Rayonier's Q2 Earnings Beat, Revenues Miss Estimates

Rayonier reported second-quarter 2019 net income per share of 14 cents, surpassing the Zacks Consensus Estimate of 12 cents. However, both net income and revenues witnessed year-over-year declines.

Net income per share fell from 28 cents earned in the prior-year quarter. Moreover, revenues were down 24.8% year over year to $184.8 million. The figure also missed the Zacks Consensus Estimate of $196.1 million.

Rayonier’s performance was affected by lower operating income in the New Zealand Timber segment, Southern Timber and Real Estate segment. Further, the Pacific Northwest Timber segment incurred operating loss during the quarter. Particularly, uncertainty associated with the U.S.-China trade dispute and choppy lumber market conditions continued to adversely impact the company’s performance.

Segmental Performance

During the reported quarter, operating income in the company’s Southern Timber segment came in at $14.7 million, down 6.4% year over year. This downside resulted from lower volumes, lower non-timber income and higher depletion rates, partly offset by higher net stumpage prices, and lower overhead and other expenses.

The Pacific Northwest Timber segment posted an operating loss of $3.8 million as against $5.6 million of operating income recorded in second-quarter 2018. This was mainly due to lower net stumpage prices, lesser volumes, higher road maintenance and engineering costs, and reduced non-timber income.

The New Zealand Timber segment recorded operating income of $12.8 million, down 28.1% from the year-earlier tally. Results indicate lower net stumpage prices, decrease in volumes, higher depletion rates and unfavorable foreign exchange impacts.

Real Estate’s operating income was $15.5 million, 18% lower than the year-ago figure of $18.9 million. This was mainly due to a lower number of acres sold, partially muted by a significant rise in weighted-average prices.

The Trading segment reported operating loss of $0.2 million, against operating income of $0.2 million posted in the year-earlier quarter. This indicates lower trading margins resulting from lower volumes and prices.

Liquidity

Rayonier ended the second quarter with $131.0 million in cash and cash equivalents, down from $148.4 million recorded as of Dec 31, 2018. Total long-term debt was $972.8 million, marginally ahead of $972.6 million as on Dec 31, 2018.

Outlook

Rayonier’s timber segments continue to be affected by the U.S.-China trade dispute and its corresponding effects. Amid this, the company tempered its expectations for the rest of the year. The company now expects full-year net income attributable to Rayonier of $54-$63 million, EPS of 42-49 cents and adjusted EBITDA of $245-$265 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -76.47% due to these changes.

VGM Scores

At this time, Rayonier has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rayonier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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