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Will Rayonier's (RYN) Q4 Earnings Disappoint Estimates? - Analyst Blog

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Real estate investment trust ("REIT") Rayonier Inc. ( RYN ) is expected to report fourth-quarter 2014 results on Feb 12.

Although the company posted a 35.00% positive earnings surprise in the preceding quarter, it has recorded a negative average surprise of 10.19% for the trailing four quarters.

Let's see how things have shaped up for this announcement.

Factors to Consider This Quarter

For the nine months ended Sep 30, 2014, Rayonier's operating loss from the corporate and other segment doubled to $28 million. However, in the third quarter, loss from this segment narrowed to $6 million on a sequential basis. For all the segments together (forest resources, real estate, other operations, and corporate and other), in 3Q14, total operating income declined sequentially.

In Forest Resources, Rayonier anticipates lower prices in New Zealand and U.S. Pacific Northwest, mainly because of reduced demand for export in the second half of 2014. This was due to excess worldwide supply from higher log inventory imbalance in China. For fourth quarter too, Rayonier predicts lower prices on similar concerns. Further, the company lowered its projection for harvest volumes in Northwest and this will adversely impact the fourth-quarter results.

Nevertheless, improving revenues from the timberlands in the U.S. South and Pacific Northwest had come as a relief for the company in the third quarter. Also, given the encouraging demographic trends, which are expected to drive an uptick in housing markets and nationwide demand for real estate properties, the company retains scope for improvement.

Rayonier follows a disciplined approach toward the acquisition of timberlands in the commercially lucrative timber producing regions in the U.S. South and U.S. Pacific Northwest. The company focuses on improving the average productivity of its timberland holdings and generating better cash flows.

Further, Rayonier aims to enhance its portfolio by selling non-strategic timberland and acquiring higher quality land in stronger markets. Backed by a strong balance sheet, we expect the company to have continued access to capital on favorable terms, which, in turn, will help it fund future growth opportunities.

Earnings Whispers

Our proven model does not conclusively show that Rayonier 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 this to happen. That is not the case here as you will see below.

Zacks ESP : Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 8 cents. Hence, the difference is 0.00%.

Zacks Rank #3 : Rayonier's Zacks Rank #3, when combined with a 0.00% Earnings ESP, makes surprise prediction difficult.

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

Stocks to Consider

You could consider other stocks in the REIT sector that have the combination of a positive Earnings ESP and a favorable Zacks Rank, and are hence poised for an earnings beat this quarter:

Vornado Realty Trust ( VNO ) has an Earnings ESP of +1.63% and a Zacks Rank #3. The company will report fourth-quarter results on Feb 17.

Public Storage ( PSA ) has an Earnings ESP of +0.46% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 19.

Ashford Hospitality Trust, Inc. ( AHT ) has an Earnings ESP of +15.39% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 26.

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PUBLIC STORAGE (PSA): Free Stock Analysis Report

VORNADO RLTY TR (VNO): Free Stock Analysis Report

RAYONIER INC (RYN): Free Stock Analysis Report

ASHFORD HOSPTLY (AHT): 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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