Plum Creek Timber Co. Inc.
), a real estate investment trust (REIT) that owns one of the
largest private timberlands in the U.S., reported fiscal 2012 first
quarter earnings of 18 cents per share, which missed the Zacks
Consensus Estimate by 5 cents.
We cover below the results of the recent earnings announcement,
subsequent analyst estimate revisions and the Zacks ratings for the
short-term and long-term outlook for the stock.
Earnings Report Review
Plum Creek reported fiscal 2012 first quarter earnings of $29
million or 18 cents per share, compared with $38 million or 23
cents in the year-earlier quarter. The year-over-year decline in
earnings was primarily due to lower operating income from the Real
Total revenues for the quarter were $337 million compared with
$275 million in the year-ago quarter. Total quarterly revenues
exceeded the Zacks Consensus Estimate of $330 million. Adjusted
EBITDA (earnings before interest, tax, depreciation, and
amortization) for the first quarter of 2012 was $139 million
compared to $100 million in the year-ago quarter.
The company witnessed significant fluctuations in revenue
generated across the geographical regions. With considerable
geographic diversity, Plum Creek was able to adjust its harvest
plans to capitalize on stronger markets and protect value in weaker
ones. Consequently, management was confident to meet its earnings
expectations for 2012.
(Read our full coverage on this earnings report:
Plum Creek Misses Estimates
Earnings Estimate Revisions - Overview
Fiscal earnings estimates have dipped for Plum Creek since the
earnings release, meaning that analysts were somewhat bearish about
the long-term performance of the company. Let's dig into the
earnings estimate details.
Agreement of Estimate Revisions
In the last 7 days, fiscal 2012 earnings estimates were lowered
by 4 analysts out of 9 covering the stock, while 1 has raised the
same. For fiscal 2013, 3 out of 7 analysts covering the stock have
revised their estimates downward, while one has increased it. This
indicates a negative directional movement for the fiscal year
Management also felt that the overall pace of recovery was slow.
However, it expected the business conditions to improve as the year
Magnitude of Estimate Revisions
Earnings estimates for fiscal 2012 have dipped 4 cents from
$1.17 to $1.13 since the earnings announcement. Management,
however, remains overtly optimistic about a strong performance in
the current fiscal year.
For full year 2012, Plum Creek expects earnings in the range of
$1.00 to $1.25 per share. For fiscal 2013, earnings estimates have
decreased 2 cents from $1.44 to $1.42. This is disappointing news
for the company.
The long-term earnings estimate picture of Plum Creek is
neutral, although it is slightly skewed in the negative direction.
Plum Creek is the largest publicly-held timber REIT, and owns the
largest and most geographically diversified private timberland in
the U.S. This enables the company to benefit from large economies
of scale and capitalize on the increasing value of timber over time
to offset several negative effects of cyclical commodity
Plum Creek's diversified timber and land base provides excellent
operational flexibility to respond to changing market conditions
amid challenging macroeconomic environment. The company is likely
to continue to defer harvest and sell off non-core timber assets in
order to fund its dividend and maintain significant liquidity.
This defensive behavior seems appropriate given the company's
stated objective of maximizing long-term value and maintaining a
stable dividend payout.
However, Plum Creek's business is affected by the slow recovery
of the overall economy, which has resulted in a lesser demand for
sawlog. In addition, prices for logs and manufactured wood products
remain highly volatile. As such, factors beyond the direct control
of the company undermine its long-term growth potential.
Currently, we maintain our Neutral rating on Plum Creek with a
Zacks #3 Rank, which translates into a short-term Hold
recommendation. We also have a Neutral recommendation and a Zacks
#3 Rank for
), a competitor of Plum Creek.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
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