Shares of Plum Creek Timber Co. Inc.PCL scaled a new 52-week high of $51.33 on Nov 27, before closing the session at $51.08. This reflects a solid year-to-date return of nearly 24% for the stock. The trading volume for the session was nearly 0.9 million shares.
However, we believe that this Zacks Rank #3 (Hold) stock has further potential to move higher, given its recent merger deal and a diversified portfolio.
Recently, Plum Creek and Weyerhaeuser Co. WY inked a merger deal to create a $23-billion timber, land and forest products company, the largest in the U.S. The combined entity will own over 13 million acres of productive timberland, which will help it reap economies of scale and capitalize on housing recovery.
In late October, Plum Creek released third-quarter 2015 results. The company's earnings came in at 58 cents per share, comfortably beating the Zacks Consensus Estimate of 51 cents and improving from the prior-year figure of 34 cents. Total revenue for the quarter was $414 million, up 10.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $434 million.
We believe that Plum Creek's geographically diversified private timberland portfolio enables it to benefit from large economies of scale and capitalize on the increasing demand for timber to offset negative effect of cyclical commodity pricing. This diversified timber and land base also provides the firm excellent operational flexibility to adapt with the changing market conditions.
However, issues like seasonality in the forest products industry, sluggish recovery of the residential construction market and cut-throat competition with national and local players keep us concerned.
Notably, over the last 7 days, the Zacks Consensus Estimate for the stock remained unchanged at $1.09 and $1.37 for 2015 and 2016, respectively.
Currently, Weyerhaeuser has a Zacks Rank #3, the same as Plum Creek.
Stocks to Consider
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.