Last week,
Plum Creek Timber Company Inc. (
PCL
)
- a leading timber real estate investment trust (REIT) - acquired
an interest in four South Carolina-based quarries for $75
million. The quarries, with around 144 million tons of crushed
stone production, were bought from rock products specialist -
Vulcan Materials Company (
VMC
)
.
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
for the next 25 years, starting this month.
The unusual investment of the company for buying rocks, instead
of timberland, reflects its strategic move to boost the natural
resource businesses. The company forms strategic alliances with
industry-specific leaders to focus on natural resource
opportunities, such as mineral extraction, natural gas production
as well as communication and transportation, for enhancing the
segment. In the third quarter of 2012, the company generated
around $5 million of revenue from this segment.
We expect the abovementioned transaction to be accretive to the
company's earnings going forward, on the back of Vulcan's
market-leading skills and high-potential prospects of the South
Carolina market.
Plum Creek is scheduled to release its fourth-quarter 2012
results on Jan 28, 2013, after the closing bell. The Zacks
Consensus Estimate for the company's fourth-quarter earnings is
currently pegged at 29 cents per share.
Zacks Earnings ESP (Read:
ZACKS EARNINGS ESP: A BETTER METHOD
) for Plum Creek is -3.45% for the fourth quarter. This, along
with its Zacks Rank #3 (Hold), reduces the chance for a positive
earnings surprise.
Among the company's peers that are performing better and are
worth a look include
Louisiana-Pacific Corp. (
LPX
)
and
Weyerhaeuser Co. (
WY
)
, carrying Zacks Rank #1 (Strong Buy) and Zacks Rank #2
(Buy), respectively.
LOUISIANA PAC (LPX): Free Stock Analysis
Report
PLUM CREEK TMBR (PCL): Free Stock Analysis
Report
VULCAN MATLS CO (VMC): Free Stock Analysis
Report
WEYERHAEUSER CO (WY): Free Stock Analysis
Report
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