Weyerhaeuser's Q1 Earnings Beats Est. - Analyst Blog

Weyerhaeuser Company WY reported earnings per share, before special items, of 26 cents in first-quarter 2014, flat year over year and 2 cents above the Zacks Consensus Estimate of 24 cents.   

Including one-time gains and charges, Weyerhaeuser reported earnings per share of 31 cents in the quarter, up from 26 cents in the year-ago quarter.

Revenue

In first-quarter 2014, Weyerhaeuser generated net sales of $1,984 million, up 1.7% year over year. However, the top-line result lagged the Zacks Consensus Estimate of $2,060 million.

As for the segments, the Timberland segment posted revenues of $377 million, up 28.7% year over year and represented 19.0% of total revenue. The segment benefited from the acquisition of Longview Timber LLC in Jul 2013. Revenues from the Wood Products segment decreased 9.1% to $898 million and represented 45.3% of total revenue.

Revenues generated from the Cellulose Fibers segment, representing roughly 23.2% of total revenue, decreased 2.7% to $461 million, while the Real Estate segment generated revenues of $248 million in the quarter, up 26.5% year over year and accounting for 12.5% of total revenue.
 
Margins

Weyerhaeuser reported about 1.5% year-over-year increase in cost of sales in the reported quarter, which as a percentage of revenue came in at 78.4%. Selling, general and administrative expenses were 7.6% of revenue and decreased 11.2% over the year-ago quarter. Research and development expenses were about $7 million, flat compared with the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $396 million versus $387 million in the year-ago quarter. Adjusted EBITDA margin was 20.0%, up from 19.8% in the year-ago quarter.

Balance Sheet

Exiting first-quarter 2014, Weyerhaeuser had cash and cash equivalents (Forest Products and Real Estate) of $780 million, down from $835 million in the previous quarter. Long-term debt was flat at $4,891 million.
 
Cash Flow

In first-quarter 2014, Weyerhaeuser generated cash of $109 million from operating activities versus $61 million used in the year-ago quarter. Capital spending increased 45.7% year over year to $51 million. In the reported quarter, the company paid dividend amounting to $129 million.

Outlook

For second-quarter 2014, Weyerhaeuser anticipates comparable earnings from the sequentially preceding quarter. In the West, higher export demand will drive volumes, which will be offset by lower selling prices and increase in unit logging and transportation expenses. In the South, silviculture expenses are expected to increase. Volumes and log price realizations will increase. Earnings are anticipated to be $20 million from the disposition of timberlands.

For the Wood Products segment, earnings are expected to increase sequentially driven by higher selling prices, especially for oriented strand board and engineered wood products, and higher volumes.

For the Cellulose Fibers segment, Weyerhaeuser anticipates higher earnings sequentially driven by increase in pulp sales volumes and lower expenses.

For the Real Estate segment, Weyerhaeuser anticipates higher profits from single-family homebuilding operations. Also, modest earnings are anticipated from land and lots sales. Home closings are expected to increase.

Weyerhaeuser currently has a market capitalization of $16.8 billion and carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the building products industry include Vulcan Materials Company VMC, Nortek Inc. NTK and United Rentals, Inc. URI. While Vulcan Materials sports a Zacks Rank #1 (Strong Buy), both Nortek and United Rentals hold a Zacks Rank #2 (Buy).