Plum Creek Timber Co. Inc. (PCL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Plum Creek's first-quarter 2014 earnings per share came ahead of the Zacks Consensus Estimate thanks to higher log prices and added harvest volumes from its recent timberlands acquisition. However, the results were significantly below the prior-year quarter earnings per share. This unfavorable year-over-year comparison was due to $0.21 per share benefit experienced in the prior-year quarter from the sale of a large non-strategic timberland. Moreover, for the first quarter, total revenue fell 6.8% year over year and missed the Zacks Consensus Estimate. While we believe that the company's Southern Timberland buyout holds good for long-term growth but earnings is projected to be dilutive in 2014. Furthermore, the cyclical nature of the business, stiff competition and strict environment policies remain causes of concern.

Overview:

Based in Seattle, WA, Plum Creek Timber Company Inc. is a leading publicly-held timber real estate investment trust (REIT) and the largest owners of private timberland in the U.S. The company produces lumber, plywood and medium density fiberboard (MDF) at wood product manufacturing facilities in the Northwest. The company also has natural resource businesses that focus on opportunities resulting from property ownership. It includes the scope for mineral extraction and natural gas production as well as communication and transportation.

Plum Creek reports its operational data under 5 business segments. It includes timberland operations in 2 business segments: the Northern Resources Segment and the Southern Resources Segment.

Northern Resources Segment comprises timberlands in Maine, Michigan, Montana, New Hampshire, Oregon, Vermont, Washington, West Virginia and Wisconsin. Timber harvested in the Northern Resources segment is sold as logs to domestic mills and used in its own manufacturing facilities as well. The Southern Resources Segment consists of timberland in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Texas. Logs are sold to third-party mills including manufacturers of lumber, plywood, pulp and paper products.

Among the other segments, Real Estate segment comprises sales of better-use timberland and sale of non-strategic timberland. It also operates a real estate development business.

The Manufacturing segment includes lumber mills, plywood plants, lumber remanufacturing facilities and medium density fiberboard facilities. These facilities convert logs to lumber, plywood and other products and convert chips, sawdust and wood shavings to MDF.

Moreover, Plum Creek has the Energy and Natural Resources segment that consists of the natural resource businesses, which focus on opportunities for oil and natural gas production, rock and mineral extraction, wind power and communication and transportation rights of way. This segment was previously known as Other segment and effective fourth-quarter 2013 the company changed its name to maintain the transparency and comparability of its existing business segments.

Plum Creek's total revenues contribution in first quarter 2014 by different product types is given below.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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