On May 16, 2014, we issued an updated research report on the
timber real estate investment trust (REIT),
Plum Creek Timber Company Inc.
Plum Creek's first-quarter 2014 earnings of 17 cents per share
came ahead of the Zacks Consensus Estimate, but was significantly
below (down 18 cents) the prior-year quarter earnings of 35 cents
This unfavorable year-over-year comparison was due to a benefit
of 21 cents per share experienced in the prior-year quarter from
the sale of a large non-strategic timberland. Moreover, lower
operations in the real estate segment in the quarter added to the
woes and total revenue fell 6.8% year over year and missed the
Zacks Consensus Estimate.
Though the Southern Timberland buyout holds good for Plum
Creek's long-term growth and is expected to be cash flow accretive
on a per share basis, earnings are projected to be dilutive in
2014. Also, northern sawlog prices are expected to decline in the
second quarter with log supply expanding seasonally with improved
timber land access on the West Coast.
In addition, Plum Creek's business is affected by the
seasonality of the forest products industry and by high volatility
in the price of logs and manufactured wood products. Given these
factors, we expect the company's bottom-line growth to remain
restrained in the coming quarters
Analysts turned skeptical on the stock's future performance.
Hence, over the last 7 days, the Zacks Consensus Estimate for 2014
and 2015 remained unchanged at $1.39 and $1.66 per share,
respectively. Plum Creek currently carries a Zacks Rank #4
Key Picks from the Sector
Some better-ranked stocks in the REIT sector are
Duke Realty Corporation
SL Green Realty Corp.
Healthcare Realty Trust Incorporated
). All these stocks have a Zacks Rank #2 (Buy).
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