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Why Is Rayonier (RYN) Down 1.5% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Rayonier (RYN). Shares have lost about 1.5% in that time frame, outperforming 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 Beats Q4 Earnings Estimates on Revenue Growth

Rayonier recorded fourth-quarter 2020 pro forma net income per share of 8 cents, surpassing the Zacks Consensus Estimate of 5 cents. However, the figure compares unfavorably with 12 cents per share reported in the year-ago period.

Pro forma net income excludes costs related to the merger with Pope Resources of $0.7 million incurred during the fourth quarter.

Results reflect a year-over-year increase in sales. However, cost of sales and interest expenses flared up, thereby, straining the bottom line.

Pro-forma revenues were up around 10% year over year to $196.30 million. In addition, the revenue figure outpaced the Zacks Consensus Estimate of $183 million.

For 2020, the company reported pro forma net income per share of 25 cents, down 46% from 46 cents in the prior year but outpaced the Zacks Consensus Estimate of 23 cents. Pro forma revenues of $720.4 million improved 1.2% year over year.

Segmental Performance

During the fourth quarter, pro forma operating income at the company’s Southern Timber segment was $9.9 million, down from the prior-year quarter’s $12 million. The downside resulted from lower non-timber income and volumes. However, these negatives were partially offset by higher net stumpage prices and lower depletion rates.

The Pacific Northwest Timber segment reported pro forma operating loss of $0.5 million, improving from the operating loss of $1.3 million posted in fourth-quarter 2019. This was mainly due to higher net stumpage prices and non-timber income, muted by higher depletion rates, and overhead costs.

The New Zealand Timber segment recorded pro forma operating income of $8.8 million, down from the year-earlier number of $9.4 million. Results indicate higher volumes, increased net stumpage prices and lower costs, partly negated by lower carbon credit sales and unfavorable foreign-exchange impact.

The Timber Funds segment reported pro forma operating income of $0.3 million in the fourth quarter.

Real Estate’s pro forma operating income of $10.9 million was down from the year-ago figure of $12.7 million. This chiefly resulted from a decrease in weighted-average prices.

The Corporate and Other segment reported pro forma operating loss of $7 million in fourth-quarter 2020. The segment registered pro forma operating loss of $6.5 million in fourth-quarter 2019.

Liquidity

Rayonier ended 2020 with $80.5 million in cash and cash equivalents, up from $68.7 million recorded as of Dec 31, 2019. However, total long-term debt was $1.3 billion, up from $973.1 million as of Dec 31, 2019.

Outlook

Rayonier expects 2021 adjusted EBITDA and EPS to increase year over year to $285-$315 million and 32-41 cents, respectively. This is supported by increased contributions from each of its timber segments. However, the company projects lower contribution from the Real Estate segment after a banner 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 166.67% due to these changes.

VGM Scores

Currently, Rayonier has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. 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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