Strong Housing Starts And Chinese Demand Bode Well For Weyerhaeuser

Argus’ Jacob Kilstein believes that robust trends in housing starts and China demand, along with the sale of the struggling Cellulose Fibers business could prove to be future growth drivers for Weyerhaeuser Co WY

Kilstein reiterated a Buy rating on the company, with a price target of $35.

Positive Trends

“We also expect the company to benefit from its leading market position and from the recently completed $8 billion acquisition of Plum Creek Timber, which will complement its existing operations and provide significant economies of scale,” the analyst mentioned.

Weyerhaeuser expected a moderate increase in housing starts in 2016, indicating persisting demand for lumber.

Single family housing starts grew 15 percent through June 2016, as compared to the same period a year ago, which Kilstein believes could be a positive indicator for the full year.

The company also believes that job growth and low mortgage rates would drive the demand for housing starts.

Dividend Raise

“Weyerhaeuser recently raised its quarterly dividend by 7 percent to $0.31 per share, for a yield of about 4.1 percent. Over the last four years, the company has raised its dividend at a compound annual rate of 18 percent,” the analyst pointed out.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!