Here's Why You Should Add Rayonier (RYN) To Your Portfolio

Shares of Rayonier (NYSE:RYN) have been performing well, of late. Over the past three months, the stock has gained 8.4% while the industry has recorded growth of 5.4%.

This rally is anticipated to continue in the near term as there are a number of favorable factors.

In third-quarter 2017, the company posted encouraging results with respect to pro forma net income. Rayonier reported pro forma net income of 19 cents per share, comfortably surpassing the Zacks Consensus Estimate of 5 cents. Results highlighted solid performance of Pacific Northwest and New Zealand Timber segments on account of higher harvest volumes and increase in sawtimber prices.

Key Driving Factors

Well Positioned Portfolio: Rayonier enjoys a portfolio of 2.7 million acres of timberlands in some of the most productive timber-growing regions of the U.S. South, Pacific Northwest and New Zealand. Further, these timberlands are of strategic importance as they are located in close proximity to pulpwood consuming mills that manufacture products for the growing end markets. In addition to this, the company is witnessing increasing demand from pellet manufacturers, mainly in Texas and Georgia. Hence, footprint in some of the most productive locations has enabled it to enjoy favorable demand-supply dynamics and better pricing power.

Secure Cash Flows: Rayonier primarily requires cash for distribution and to maintain productivity of timberlands through replanting and silviculture. For this, it depends on cash flow from timber harvest and real estate sales as its primary source of cash. Since the company’s operations generate consistent cash flow, Rayonier’s dependency on other capital resources is less. In fact, recurring cash generation from operations provides the company sufficient capacity to pursue timberland acquisitions.

Prudent Investments and Acquisitions: To further strengthen its portfolio, this preeminent timberland real estate investment trust (REIT) is tapping investment opportunities. Leveraging on the active timberland market, Rayonier has acquired industrial timberlands worth $239.1 million during the nine-month period ended Sep 30, 2017. These acquisitions have upgraded the company’s U.S. South and Pacific Northwest portfolio, and positioned it to gain from the ongoing U.S. housing recovery.

Exploring Higher-and-Better-Use (HBU) Opportunities: Rayonier constantly strives to derive maximum potential of its properties by finding alternative uses of the timberlands. In fact, there are many attractive HBU opportunities across the U.S. South, mainly in the Florida and Georgia coastal corridor. Rayonier’s efforts to continuously monetize HBU properties, through rural land sales, has enabled it to increase the value of its portfolio.

Zacks Rank: The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Other top-ranked stocks in the same space include Armstrong World Industries (NYSE:AWI) , Boise Cascade Company (NYSE:BCC) and Potlatch Corporation (NASDAQ:PCH) . All these stocks carry a Zacks Rank of 2.

Shares of Armstrong World Industries have gained 32.9% over the past six months.

Boise Cascade’s earnings estimates for 2017 have been revised upward to $1.95 in a month’s time. Over the past six months, the company’s shares have soared 32.1%.

Potlatch Corporation’s 2017 earnings estimates have remained unchanged at $2.39 over the past month. The stock has rallied 8.6% in the past six months.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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