With strong demand for its products and excellent cost
management, Potlatch seems to be in a position to deliver solid
Further, with a solid outlook for the industry, this Zacks Rank
#1 (Strong Buy) stock looks very attractive as of now.
About the Company
Structured as a REIT, Potlatch owns approximately 1.42
million acres of forestland in Arkansas, Idaho, and Minnesota. The
company also operates six manufacturing facilities that produce
lumber and panel products. Additionally, the company also
conducts a real estate sales and development business.
Excellent Results and Solid Fundamentals
On April 23, 2013, Potlatch reported its first quarter
earnings.Total revenues for the quarter were $139.3 million, and
the net income for the quarter was $15.5 million, or $0.38 per
diluted share. The results beat both on the revenue and the
Results benefitted from strong demand for lumber and significant
recovery in lumber prices. Further, growing demand for rural and
recreational properties resulted in solid results for the real
Additionally, the company continues to maintain a conservative
capital structure and focuses on reducing its expenses. Both
S&P and Moody's recently upgraded PCH's credit ratings.
Positive Earnings Estimates Revisions
As a result of improving outlook for the company, analysts have
been revising their estimates for the June 2013 quarter and the
fiscal year 2013. Zacks consensus estimates for the second quarter
and the fiscal year 2013 now stand at $0.30 and $1.68 per share,
respectively, up sharply from $0.19 and $1.25 per share, 30 days
Solid Industry Outlook
With a Zacks Industry Rank of 8 out of 265, Building
Products/Wood industry is expected to outperform significantly in
the near-to-mid term.
Better Play on Housing Recovery?
As a result of improving sentiment, home construction companies
have been on the run in the past few months and some of them
already look quite expensive.
From valuation perspective, timber industry looks quite
attractive now. Continued pickup in the housing construction and
remodeling activities will result in increased demand for wood.
Further, most timber companies deferred their harvest when the
demand for wood was low while their assets (trees) continued to
grow and so as the housing market returns, the cash flows from
harvest operations will increase in a big way.
Lumber prices have been soaring of late and will continue to
benefit timber companies.
The Bottom Line
PCH is a Zacks Rank#1 (Strong Buy) stock. It also has a
longer-term Zacks recommendation of "Outperform". Additionally, a
Zacks Industry rank of 8 out of 265 indicates very strong
likelihood of continued strength in the short to medium term,
compared to other industries.
Further with a dividend yield of 2.6%, excellent fundaments and
a solid growth potential, I believe that this stock will be a nice
addition to any portfolio.
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