) is fired up about the housing recovery.
It manages and harvests timberlands and manufactures wood
products used in home construction, such as plywood, particle
board and engineered wood.
Weyerhaeuser also builds single-family homes under various
brand names. It is especially active in California, Nevada and
Arizona, where it operates as Pardee Homes.
"We're looking forward to 2013 because I think we have the
opportunity to fully participate in this (housing) recovery," CEO
Daniel Fulton told analysts in the fourth-quarter conference
In business since 1900, Weyerhaeuser is one of the largest
owners of timberland in the U.S. It owns or controls more than 6
million acres in the Pacific Northwest and the South.
It's also one of the biggest manufacturers of wood and
cellulose-fiber products. The company is based in Federal Way,
Wash., between Seattle and Tacoma.
"Weyerhaeuser is sensitive to housing in three of its four
business segments: real estate, wood products and ultimately
timber, the logs it harvests and converts," said analyst Steven
Chercover of D.A. Davidson.
The more homes built, the more lumber is needed, he says. And
that means more trees for the company to harvest. Some of its
timber is exported to Asia.
Weyerhaeuser's bullish management expects 2013 housing starts
in the U.S. to top 1 million units, for 675,000 single-family
homes and 335,000 multifamily units, a total that would be about
30% higher than in 2012.
The one business that's not sensitive to housing is cellulose
fibers, which includes fluff products such as diapers.
Chercover compares Weyerhaeuser to a four-cylinder engine.
"Three of its cylinders were misfiring during the housing
recession," he said. "Now that housing is improving, the whole
engine is starting to perform instead of one cylinder."
The fourth quarter capped off a year that was the best in
years as the company began to emerge from the negative effects of
the housing downturn.
Earnings jumped 76% from 2011 to 58 cents a share. Analysts
forecast profit will rise 90% this year, to $1.10 a share,
according to Thomson Reuters. It had lost as much as $2.05 a
share in 2009.
As a REIT, much of the company's profits are funneled back to
shareholders. The firm raised its dividend late last year.
"They're starting to share the spoils of the better outlook
and cash flow with shareholders," Chercover said.
First-quarter results will be released April 26. Analysts
expect profit of 21 cents vs. just 2 cents in the same quarter a
But some analysts aren't too fired up about the company just
yet. They caution that investors have already bid up shares in
anticipation of the housing rebound.
"What to do with the stock: take profits," advised Credit
Agricole Securities analyst Mark Connelly after Q4 results were
released Jan. 25. Good advice? After falling some, shares have
since climbed only slightly, logging most of their 24%
year-over-year gain to date before the Q4 report.
Timber REITSPotlatch (
),Plumb Creek Timber (
) andRayonier (
) have also seen their shares rise in the last year. All three
recently hit 52-week highs.
Connelly allowed that Weyerhaeuser's homebuilding operations
in Southern California, Las Vegas and Phoenix appear to be "good
news in the near term" as those "boom-bust" markets rebound
The company's real estate business in Q4 earned $81 million on
$407 million in revenue. But results included a $65 million sale
of non-strategic land in San Diego, which was zoned for
Without the land sale, which amounted to 9 cents a share,
Weyerhaeuser would have missed Wall Street views by a hair. With
the sale, it earned 26 cents a share, up 86% from the earlier
Revenue totaled $2 billion, up from $1.6 billion a year
Connelly noted that lumber and wood panel results were weaker
than expected despite a strong pickup in prices. And the firm's
fluff business, which carried the company through the downturn,
"stalled" on overcapacity.
Industrywide, overcapacity issues are expected to ease by
Weyerhaeuser's bullish housing forecast for 2013 could support
current strong prices for lumber and wood panels. Chercover said
lumber prices at the end of March were $408 per thousand board
feet vs. $279 a year earlier. Year-to-date, prices were up
Wood particle board was up $60 in the first three months of
2013, he says. In the last year, the price had climbed from $202
Fourth-quarter profit gains were driven mostly by timberland
and real estate. Home sales in the company's Southern California
and Las Vegas markets showed "significant turnaround," management
"Our Pardee president described the change as though someone
turned on a switch," CEO Fulton said in the Q4 earnings call. He
said that California sales were up more than 80% and Las Vegas
sales nearly tripled from a year earlier.
The California housing recovery bodes well for the firm's
Western wood products and timberland sales, he said.
Pardee's home backlog at year-end was up 80% from the prior
year, while the average home price in backlog was 13% higher.
The company's homebuilding division should have "momentum into
2014," Chercover says.
Meanwhile, Weyerhaeuser's export shipments to Japan, China and
South Korea have been growing, especially on higher demand from
Japan. About 70% of the firm's exports go to Japan, 20% to China
and the rest to Korea.
Japan is more profitable because it buys higher-quality