On Nov 20, 2013, we reiterated our long-term Neutral
Plum Creek Timber Company Inc.
). This is based on the company's strong third-quarter
performance, and diversified timber and recent southern
timberlands acquisition. Yet stiff competition and declining
harvest volumes are plausible concerns.
Why the Reiteration?
Aided by notable performances across all business segments,
especially southern resources, real estate and manufacturing,
Plum Creek's third-quarter 2013 earnings per share of 44 cents,
surpassed the Zacks Consensus Estimate by 2 cents and the
year-ago quarter figure by 8 cents. Particularly, rising demand
of wood products stemming from a recovery in the residential
construction market benefited this leading publicly-held timber
real estate investment trust (REIT).
Plum Creek has around 6.3 million acres of timberland in the
major timber producing regions and wood products manufacturing
facilities in the Northwest. 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 pricing.
Also, the improvement in demographic trends, resulting in an
uptick in housing markets and demand for real estate properties
across the nation provides a strong economic backdrop for the
company to demonstrate a solid financial performance in the
The recent acquisition of Southern Timberlands worth $1.1
billion is a quality addition to Plum Creek's portfolio in this
respect. Notably, with the advancement of the residential
construction market in the southern region, management expects
sawlog demand to rise on the back of improving production of
lumber and structural panels.
Yet, we expect cyclical nature of the business, cut-throat
competition and stringent environmental regulations to limit the
company's long-term growth to some extent. Also, the currently
declining total harvest volume might limit any robust top line
expansion going forward.
Consequently, over the last 30 days, the Zacks Consensus
Estimate for 2013 remained stable at $1.36 per share. For 2014,
the Zacks Consensus Estimate dipped by 2.4% to $1.61 per share.
Hence, Plum Creek currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked REITs include
Ramco-Gershenson Properties Trust
American Assets, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AMER ASSETS TR (AAT): Free Stock Analysis
PLUM CREEK TMBR (PCL): Free Stock Analysis
PUBLIC STORAGE (PSA): Free Stock Analysis
RAMCO-GERSHENSN (RPT): Free Stock Analysis
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