A month has gone by since the last earnings report for Weyerhaeuser (WY). Shares have added about 8.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Weyerhaeuser due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Weyerhaeuser's (WY) Q2 Earnings Top, Adjusted EBITDA Up Y/Y
Weyerhaeuser Company reported impressive second-quarter 2020 results, wherein earnings and revenues comfortably surpassed the Zacks Consensus Estimate. The company delivered strong performance across businesses despite COVID-19 impacts.
Inside the Headlines
The company reported adjusted earnings of 11 cents per share, which surpassed the consensus mark of 1 cent by a whopping 1000% but decreased 31.3% from the year-ago figure of 16 cents.
Net sales of $1,631 million topped the consensus mark of $1,321 million by 24.4%. The reported figure, however, fell 3.6% from $1,692 million reported in the prior-year quarter.
Adjusted EBITDA came in at $386 million for the quarter, up 12.5% from $343 million in the year-ago period.
Timberlands: Net sales (including inter-segment sales of $121 million) in the segment came in at $480 million, down 9.8% from the year-ago figure of $532 million. Lower volumes and higher realizations for domestic and Japan export logs in the West, increased export costs, seasonally higher forestry and road spending, 4% reduced harvest volumes in the South, along with softness in fee harvest due to spring breakup impacted sales. Yet, improved China export volumes and realizations partially offset the negatives. Adjusted EBITDA came in at $140 million, down 20% from $175 million in the year-ago quarter.
Real Estate, Energy and Natural Resources: Segment’s net sales amounted to $65 million, down 19.8% from $81 million reported in the prior-year quarter owing to reduction in real estate acres sold and average price per acre. Adjusted EBITDA also fell 19.7% to $57 million from $71 million in the year-ago quarter.
Wood Products: Sales in the segment totaled $1,207 million, slightly down from $1,210 million in the prior-year quarter. Adjusted EBITDA came in at $198 million, up 54.7% from the year-ago figure of $128 million. Market demand for wood products has been improving post April. Also, a 5% sequential increase in average sales realizations for lumber and improved manufacturing costs across all product lines supported the growth. This was partially offset by lower sales volumes across most of its product lines.
As of Jun 30, 2020, Weyerhaeuser had cash and cash equivalents of $643 million, up from $139 million at 2019-end. Long-term debt was $6,299 million at quarter-end versus $6,147 million at 2019-end.
Net cash from operations was $391 million during the quarter compared with $396 million in the year-ago period.
For the third quarter, the company expects sequentially lower earnings and adjusted EBITDA in the Timberland segment. Geographically, in the West, the company expects lower average log sales realizations and seasonally higher road, forestry, and per unit logging as well as hauling costs. It anticipates sequentially higher average Western domestic log realizations, increased proportion of domestic log sales but slightly lower export log realizations. In the South, it projects seasonally higher forestry expenses, decreased fee harvest volumes and slightly lower average log sales realizations, primarily due to mix.
In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates sequentially comparable earnings and adjusted EBITDA for the third quarter. For 2020, it expects adjusted EBITDA to be $235 million, up from $200 million expected earlier.
Within the Wood Products segment, the company predicts earnings and adjusted EBITDA to be significantly higher on a sequential basis. It anticipates improved sales volumes across most of the product lines. Currently, third-quarter benchmark pricing for lumber and oriented strand board is much higher than the second quarter average.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 304.17% due to these changes.
At this time, Weyerhaeuser has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Weyerhaeuser has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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