Rayonier's (RYN) Q2 Earnings Beat, Revenues Miss Estimates

Rayonier Inc. (NYSE:RYN) reported second-quarter 2019 net income per share of 14 cents, surpassing the Zacks Consensus Estimate of 12 cents. However, both net income and revenues witnessed year-over-year declines.

Net income per share fell from 28 cents earned in the prior-year quarter. Moreover, revenues were down 24.8% year over year to $184.8 million. The figure also missed the Zacks Consensus Estimate of $196.1 million.

Rayonier’s performance was affected by lower operating income in the New Zealand Timber segment, Southern (NYSE:SO) Timber and Real Estate segment. Further, the Pacific Northwest Timber segment incurred operating loss during the quarter. Particularly, uncertainty associated with the U.S.-China trade dispute and choppy lumber market conditions continued to adversely impact the company’s performance.

Segmental Performance

During the reported quarter, operating income in the company’s Southern Timber segment came in at $14.7 million, down 6.4% year over year. This downside resulted from lower volumes, lower non-timber income and higher depletion rates, partly offset by higher net stumpage prices, and lower overhead and other expenses.

The Pacific Northwest Timber segment posted an operating loss of $3.8 million as against $5.6 million of operating income recorded in second-quarter 2018. This was mainly due to lower net stumpage prices, lesser volumes, higher road maintenance and engineering costs, and reduced non-timber income.

The New Zealand Timber segment recorded operating income of $12.8 million, down 28.1% from the year-earlier tally. Results indicate lower net stumpage prices, decrease in volumes, higher depletion rates and unfavorable foreign exchange impacts.

Real Estate’s operating income was $15.5 million, 18% lower than the year-ago figure of $18.9 million. This was mainly due to a lower number of acres sold, partially muted by a significant rise in weighted-average prices.

The Trading segment reported operating loss of $0.2 million, against operating income of $0.2 million posted in the year-earlier quarter. This indicates lower trading margins resulting from lower volumes and prices.

Liquidity

Rayonier ended the second quarter with $131.0 million in cash and cash equivalents, down from $148.4 million recorded as of Dec 31, 2018. Total long-term debt was $972.8 million, marginally ahead of $972.6 million as on Dec 31, 2018.

Outlook

Rayonier’s timber segments continue to be affected by the U.S.-China trade dispute and its corresponding effects. Amid this, the company tempered its expectations for the rest of the year. The company now expects full-year net income attributable to Rayonier of $54-$63 million, EPS of 42-49 cents and adjusted EBITDA of $245-$265 million.

Conclusion

Though Rayonier managed to exceed its earnings expectations, the lackluster performance in revenues is discouraging. Moreover, the U.S.-China trade war and the resultant impact keep us apprehensive about its timber segment’s performance. In fact, in the Pacific Northwest Timber segment, the company has deferred planned harvest in response to weak market conditions and given the current trade dispute issues, Rayonier forecasts limited upside to current prices through the rest of the year.

Currently, Rayonier carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Public Storage (NYSE:PSA) reported second-quarter 2019 core funds from operations (FFO) per share of $2.64, which improved 2.7% from the prior-year figure of $2.57. The reported figure also exceeded the Zacks Consensus Estimate by a whisker. Higher realized annual rent per occupied square foot supported the company’s same-store performance. Additionally, Public Storage benefited from its expansion efforts.

Federal Realty Investment Trust (NYSE:FRT) posted second-quarter FFO per share of $1.60, which beat the Zacks Consensus Estimate of $1.58. The reported figure also improved from the prior-year tally of $1.55. Results reflected rise in property operating income and cash-basis rollover growth on comparable spaces. The company also hiked its regular quarterly dividend.

Equity Residential (NYSE:EQR) delivered second-quarter 2019 normalized FFO per share of 86 cents, which surpassed the Zacks Consensus Estimate by a whisker. Additionally, normalized FFO per share figure came in 6.2% higher than the 81 cents reported in the year-ago quarter. Results mirrored improved same-store net operating income (NOI) and lease-up NOI, and other non-same store NOI.

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