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Weyerhaeuser Downgraded By D.A. Davidson, Although Company Is Off To A Good Start

Weyerhaeuser Downgraded By D.A. Davidson, Although Company Is Off To A Good Start
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Weyerhaeuser Co (NYSE: WY) reported its 1Q16 results, with the EPS a nickel ahead of the estimate, although revenues missed expectations.

D.A. Davidson’s Steven Chercover downgraded the rating on the company to Neutral, while lowering the price target from $34 to $33.

1Q Results

Chercover mentioned that the company reported its 1Q EPS at $0.24 on revenue of $1.84 billion, versus the estimates of $.0.19 and $2.07 billion, respectively.

“We believe the primary source of the variance was share count, as we used anticipated shares outstanding at quarter end while Weyerhaeuser used the weighted average shares outstanding, which was substantially lower,” the analyst explained.

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Share count assumption could also lead to variance in 2Q, although to a lower degree.

“Overall, with the reiteration of the $100 million in hard cost synergies to be realized in year one, increased operational synergy guidance in the Timberlands segment, and progress on Portfolio rationalization, the new ‘PlumHaeuser’ looks like it’s off to a good start,” according to the D.A. Davidson report.

Estimate Reduction

Chercover cautioned that it would take a minimum of a full quarter to be able to better calibrate the acquisition of Plum Creek, and estimates were likely to be revised down at that time.

“The single biggest driver of the reduction is the elimination of the contribution from Cellulose Fibers, which will now be classified as discontinued, as well as a higher share count than previously assumed,” Chercover explained.

The EPS estimates for 2016 and 2017 have been lowered.

Latest Ratings for WY

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