Plum Creek Timber Company Inc.
) reported impressive fourth quarter 2012 results. The company's
earnings per share reached 49 cents, significantly surpassing the
Zacks Consensus Estimate of 29 cents and the year-ago quarter
earnings of 38 cents. Net income for the quarter increased 29.5%
from the year-ago period to $79 million.
The better-than expected results at this real estate investment
trust (REIT) were driven by increasing demand for wood products
stemming from a recovery in the residential construction market,
resulting in improved performance by the timber, real estate and
Total revenue advanced 12.4% year over year to $354 million and
exceeded the Zacks Consensus Estimate of $297 million. Adjusted
EBITDA (earnings before interest, tax, depreciation and
amortization) came in at $150 million and was up 16.3% year over
For full year 2012, Plum Creek reported earnings of $203 million
or $1.25 per share, up from $193 million, or $1.19 per share
earned a year ago. Results also exceeded the Zacks Consensus
Estimate of $1.05 per share.
Total revenue advanced 14.7% from the prior year to $1.3 billion
and was ahead of the Zacks Consensus Estimate of $1.2 billion.
Adjusted EBITDA climbed 18.8% from a year ago to $530 million.
Reflecting positive sentiments of the investors following an
upbeat performance by Plum Creek, the stock advanced 3.4% in
Northern Resources - This segment reported operating profit of $5
million during the quarter, which was down from $7 million
recorded in the year-ago period. Results reflect a dip of 128,000
tons (11.2%) in overall harvest volumes as well as higher road
expenses. The negatives were partly mitigated by a slight
increase in prices of sawlogs and pulpwood (approximately $1.00
per ton each) from the prior-year period.
Southern Resources - This segment booked an operating profit of
$24 million, which surged 26.3% year over year and reflected
strong demand for pulpwood. Overall, harvest volumes increased
246,000 tons (7.8%) year over year.
For Pulpwood, harvest volumes escalated 181,000 tons (9.5%) from
the prior-year period while prices went up approximately $2.00
per ton to $11.00. For Sawlog, harvest volumes expanded 65,000
tons (5.1%) from the prior-year period while prices remain
unchanged at $20.00 per ton.
Real Estate - This segment generated operating profit of $74
million, up 21.3% from the prior-year quarter. The company sold
around 47,000 acres of land during the quarter, including sale of
the 16,600 acres large, non-strategic western Oregon timberlands
for $58 million
Manufacturing - This segment posted operating profit of $7
million in the quarter, which more than doubled from $3 million
earned in the year-ago quarter. Results reflect increased prices
of lumber, plywood, and medium density fiberboard compared to the
Balance Sheet Position
During the reported quarter, Plum Creek generated $116 million of
operating cash flow compared with $80 million in the year-ago
period. Moreover, at year-end 2012, the company had cash and cash
equivalents of $356 million and total long-term debt of $1.8
billion compared with $254 million and $1.3 billion,
respectively, at the end of the prior year.
Management at Plum Creek remains overtly optimistic about an
upbeat performance in 2013. For full year 2013, earnings are
expected to range within $1.25 - $1.50 per share and for first
quarter 2013, earnings are projected to be in the range of 28
cents - 33 cents per share.
Management expects sawlog prices to improve in 2013, as its
customers increase production to meet growing demand resulting
from the recovery of the residential construction market and
housing starts nearing 1 million units for the first time since
2007. Pulpwood prices are expected to improve in the South while
attractive prices in the North are likely to continue.
Total harvest volume is expected to be mostly unchanged in 2013
(between 17.5 and 18.0 million tons of timber compared with 17.9
million ton in 2012). However, the harvest mix is likely to shift
with improvement in sawlog demand and pricing.
Plum Creek has recently taken strategic initiatives that are
expected to augment the company's top line and diversify its
In January, the company penned a long-term fiber supply deal with
Drax, a power company in the U.K. to supply up to 770,000 tons of
sustainably-managed wood fiber annually during the 10-year
contract tenure to two U.S. pellet manufacturing sites. The deal
would help the company broaden its customer base and offer an
opportunity to capitalize on Drax's strategic transition toward
developing a sustainable energy platform.
Moreover, Plum Creek acquired an interest in 4 South
Carolina-based quarries for $75 million in the same month. The
quarries, with around 144 million tons of crushed stone
production, were bought from rock products specialist -
Vulcan Materials Company
As per the deal, Vulcan will continue to own and operate the
quarries. Conversely, Plum Creek will enjoy royalty payments from
the production and sale of crushed stone, mined from the quarries
over the next 25 years, starting this month. This deal reflects
its strategic move to boost the natural resource businesses.
We are encouraged with Plum Creek's impressive results in the
reported quarter and believe that its diversified timber and land
base enables it to benefit from large economies of scale.
In addition, the upsurge in demographic trends driving housing
markets and demand for real estate properties across the country
provide a strong economic backdrop for the company to demonstrate
its solid financial performance in the future.
Yet, cyclical nature of the business, cutthroat competition and
strict environment policies undermine its long-term growth
potential to some extent.
Plum Creek currently has a Zacks Rank #3 (Hold). A number of
companies that are performing better and are worth a look in the
same industry include
), carrying a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2
LOUISIANA PAC (LPX): Free Stock Analysis
POTLATCH CORP (PCH): Free Stock Analysis
PLUM CREEK TMBR (PCL): Free Stock Analysis
VULCAN MATLS CO (VMC): Free Stock Analysis
To read this article on Zacks.com click here.