We currently maintain a Neutral recommendation on
), a well renowned forest products company, anticipating its
performance to be in line with the broader market.
Weyerhaeuser provides a solid year-to-date return of 12.5% and
also growth prospects are bright for the years to come. For 2013,
management anticipates export demand to grow while housing market
recovery continues to play a key role in the U.S. Earnings from
disposition of non-strategic timberlands are expected to increase
The company's huge asset base was further strengthened with the
addition of Longview Timber LLC's assets. The acquisition added
645,000 acres of timberlands in Weyerhaeuser's asset base in
Washington and Oregon. This has increased the company's
timberland assets in Pacific Northwest to 2.6 million acres,
reflecting an increase of 33% while its total ownership of U.S.
timberlands has reached roughly 6.6 million acres.
Also, serious efforts are being made to improve operating
efficiencies and reduce costs. Non-performing assets are being
disposed of to free resources for more productive use. Of late,
the company has initiated search for suitable alternatives for
its homebuilding and real estate company, WRECO. Apart from
these, the recent increase of 10% in quarterly dividend rate
points toward the company's healthy balance sheet and strong cash
Despite all these positives, we prefer to remain on the sidelines
on Weyerhaeuser, presuming that these positives have already been
discounted in the share price. This leaves little room for
further expansion. Further, risks arising from stiff competition,
exposure to currency translation and geopolitical issues cannot
be completely ignored.
Other Stocks to Consider
Weyerhaeuser currently has a market capitalization of $16.7
billion. Other stocks to watch out for in the industry are
Boise Cascade Co.
BOISE CASCADE (BCC): Free Stock Analysis
LOUISIANA PAC (LPX): Free Stock Analysis
POTLATCH CORP (PCH): Free Stock Analysis
WEYERHAEUSER CO (WY): Free Stock Analysis
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