Plum Creek Timber Co. Inc.
), a real estate investment trust (REIT) owning and managing
timberlands in the U.S., reported earnings of $36 million or 22
cents per share in the second quarter of 2012, compared with $44
million or 27 cents in the year-earlier quarter.
The year-over-year decline in earnings was primarily due to
higher operating expenses during the reported quarter. The second
quarter 2012 earnings beat the Zacks Consensus Estimate by 4 cents.
Total revenues for the quarter were $294 million compared with $284
million in the year-ago quarter. Total quarterly revenues exceeded
the Zacks Consensus Estimate of $275 million. Adjusted EBITDA
(earnings before interest, tax, depreciation and amortization) for
the second quarter of 2012 was $95 million compared to $109 million
in the year-ago period.
The company witnessed significant fluctuation 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 that it would meet its
earnings expectations for 2012.
By segment, the Northern Resources division reported an operating
profit of $4 million during the quarter compared with $3 million in
the previous year, primarily due to favorable harvesting conditions
that yielded relatively more timber. While sawlog harvest increased
approximately 160,000 tons (34%), pulpwood harvest increased 70,000
tons (29%) year over year.
Sawlog prices remained fairly stable during the quarter compared
to the prior year at $71 per ton. However, pulpwood prices were 5%
higher ($2 per ton) in the reported quarter at $42 per ton compared
to the second quarter of 2011.
PLUM CREEK TMBR (PCL): Free Stock Analysis
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In the Southern Resources segment, operating profit was $22 million
compared to $15 million in the year-ago quarter. The year-over-year
rise in profit was attributable to higher harvest volumes due to
strong demand of pulpwood, and higher sawlog and pulpwood prices
(approximately $1 per ton each). Pulpwood volumes increased 341,000
tons (up 21%) from the prior-year period, while that of sawlog
surged by 406,000 tons (up 36%).
Operating Income in the Real Estate segment was $29 million during
the quarter on revenues of $47 million, compared with $50 million
in the year-earlier quarter on revenues of $79 million. The
Manufacturing segment reported an operating profit of $9 million
during the quarter, compared with $5 million in the year-ago
Plum Creek continued to sell large tracts of rural lands, including
non-strategic timberlands, to raise cash. During the quarter, the
company sold small, non-strategic timberlands for $1,150 per acre
and recreation lands for approximately $2,000 per acre.
During the reported quarter, Plum Creek generated $83 million of
operating cash flow compared with $81 million in the year-ago
period. At quarter-end, the company had cash and cash equivalents
of $260 million and total long-term debt of $1.5 billion.
Management remains overtly optimistic about a slow yet steady
performance in the current year. For full year 2012, Plum Creek
reiterated its earnings guidance in the range of $1.00 to $1.25 per
share, while third quarter earnings are expected to be in the range
of 32 cents to 37 cents.
We maintain our Neutral rating on Plum Creek. Plum Creek currently
has a Zacks #2 Rank that translates into a short-term Buy rating.
We also have a Neutral recommendation and a Zacks #3 Rank
(short-term Hold rating) for
), a competitor of Plum Creek.