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On Feb 11, 2015, we issued an updated research report on Weyerhaeuser Company ( WY ).  Despite being well-positioned to leverage benefits from the U.S. housing market recovery, certain near-term headwinds can impede the company's growth momentum.

Weyerhaeuser, one of the leading U.S. forest product companies, serves a diverse client base spread over the U.S., Canada, Japan, Europe and other regions. The company's West Coast Timberlands are well suited for domestic and export markets, while its Southern Timberlands are ideal for the Wood Products market. Cellulose Fibers benefits from its unique fluff and value-added products.

For 2015, Weyerhaeuser believes that gradual recovery in the U.S. housing market as well as timber supply shortage from Canada will boost demand for its Timberlands and Wood Products segments. Housing starts are expected to be approximately 1.1−1.2 million. Also, the company aims at an incremental EBITDA of $20−$30 million in the Timberland segment, while targeting to lower controllable costs by $20−$25 million in the Wood Products and $30−$35 million in the Cellulose Fibers segments.

However, Weyerhaeuser's lower-than-expected results for fourth-quarter 2014 have hurt investors' sentiments toward the stock. Earnings of 27 cents per share came in below the Zacks Consensus Estimate of 28 cents, while revenues of $1,788 million lagged the estimate of $1,809 million. Timberland revenues inched down 1.4% year over year, while Cellulose Fibers managed a marginal increase of 0.8%.

For first-quarter 2015, Weyerhaeuser anticipates sequentially lower earnings from its Cellulose Fibers segment due to reduced pulp realizations and higher maintenance expenses as well as lower liquid packaging board shipment volumes. Also, the company predicts lower sales realizations in China as well as weak log demand from Japan, due to softer housing demand and seasonal weather conditions.

Over the last 30 days, the Zacks Consensus Estimate on Weyerhaeuser decreased 5.6% to $1.53 per share for 2015 and 1.1% to $1.79 for 2016.

With a market capitalization of $18.7 billion, Weyerhaeuser currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include CaesarStone Sdot-Yam Ltd. ( CSTE ), Boise Cascade Co. ( BCC ) and Armstrong World Industries, Inc. ( AWI ). While CaesarStone Sdot-Yam sports a Zacks Rank #1 (Strong Buy), both Boise Cascade and Armstrong World Industries carry a Zacks Rank #2 (Buy).


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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.

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