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Weyerhaeuser's (WY) Q4 Earnings: Is a Beat in the Cards?

Weyerhaeuser CompanyWY is scheduled to report fourth-quarter 2016 results on Feb 3, before the market opens.

The company posted better-than-expected results in two of the last four quarters, lagged estimates in one and posted in-line results in one. Average earnings surprise was a positive 2.39%. Its shares yielded 4.12% return, outperforming the return of 2.52% recorded by the Zacks categorized Building Products-Wood industry in the last one month.

Let us see how things are shaping up for Weyerhaeuser prior to this announcement.

Factors to Affect Q4 Results

Weyerhaeuser's segmental results are highly dependent on the U.S. housing market. Housing starts were healthy in the U.S. in the fourth quarter while recording an increase of 4.9% in 2016. We believe that such improvements must support the company's forecasts of sequentially higher earnings for the Timberland and Real Estate, Energy and Natural Resources segments in the quarter.

During the fourth quarter, Weyerhaeuser communicated its intention of evaluating strategic alternatives for its timberlands and manufacturing operations in Uruguay. In November, the company completed divesting its printing papers company, North Pacific Paper Company to One Rock Capital Partners while in December, it sold off its Cellulose Fibers pulp mills to International Paper Company. We believe such strategic decisions will enable the company to boost its profitability.

In addition, we believe that the company is well positioned to reap benefits from its operational initiatives in 2016, amounting to $30−$50 million in the Timberland segment and $55−$75 million in the Wood Products segment.

Why a Likely Positive Surprise?

Our proven model conclusively shows that Weyerhaeuser will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Let us see the case for Weyerhaeuser below.

Zacks ESP: Weyerhaeuser currently has an Earnings ESP of +6.67% for the quarter. This is because the Most Accurate estimate of 16 cents is above the Zacks Consensus Estimate of 15 cents.

Weyerhaeuser Company Price, Consensus and EPS Surprise

Weyerhaeuser Company Price, Consensus and EPS Surprise | Weyerhaeuser Company Quote

Zacks Rank: Weyerhaeuser's Zacks Rank #3 when combined with a positive ESP makes an earnings beat prediction possible this quarter.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other companies in the construction sector you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:

AECOM ACM with an Earnings ESP of +1.89% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Chicago Bridge & Iron Company N.V. CBI , with an Earnings ESP of +3.45% and a Zacks Rank #2.

Century Communities, Inc. CCS , with an Earnings ESP of +14.93% and a Zacks Rank #2.

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Weyerhaeuser Company (WY): Free Stock Analysis Report

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Century Communities, Inc. (CCS): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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