Weyerhaeuser (WY) To Report Q2 Earnings: What's In Store?

Weyerhaeuser Company (NYSE:WY) is scheduled to report second-quarter 2017 results on Jul 28, before the market opens.

The company’s financial performance in the last four quarters was mixed, surpassing estimates in two and lagging in others. Average earnings surprise was a positive 1.28%. Notably, in the last quarter, the company’s earnings of 22 cents per share topped the Zacks Consensus Estimate by 22.2%.

We believe that sound financial performance and growth prospects lifted investor sentiments for the company. In the last one month, the company’s shares have yielded 3.87% return, outperforming the gain of 2.17% recorded by the industry.

Let us see how things are shaping up for Weyerhaeuser prior to this earnings announcement.

Factors Influencing Q2 Results

We believe that Weyerhaeuser is likely to benefit from improving housing market conditions in the U.S. Notably, the U.S. Census Bureau report revealed 8.3% month-over-month increase in housing starts in Jun 2017. The improvement was primarily driven by higher housing starts in the Northeast, the Midwest and the West. Also, housing completions in the month grew 5.2%. For 2017, housing starts in the U.S. is anticipated to be within 1.25−1.3 million. Single-family starts will be over 10%.

For the second quarter, the company predicts sequentially higher earnings for the Wood Products segment on the back of higher sales volumes and average sales realizations. Also, it anticipates realizing operating expenses benefits from the Timberland and Wood Products segments.

Anticipated realizations of synergistic benefits from the merger with Plum Creek Timber will likely drive Weyerhaeuser’s results in the quarter. Also, the company made strategic divestments of liquid packaging board business, printing papers company and Cellulose Fibers pulp mills in the past few quarters. These, as well as pending disposal of Uruguay-based timberlands and manufacturing business will help it concentrate on its core timber, land and forest products business. This, in turn, will lead to rise in the company’s profitability.

On the flip side, headwinds like skilled labor shortages, lack of suitable lot and mortgage availability, high debt levels, unfavorable foreign currency movements and industry competition might limit growth momentum in the to-be-reported quarter.

Earnings Whisper

Our proven model does not conclusively show that Weyerhaeuser will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. This is not the case here as elaborated below:

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks ESP: Weyerhaeuser currently has an Earnings ESP of -7.41% for the quarter. This is because the Most Accurate estimate of 25 cents is below the Zacks Consensus Estimate of 27 cents.

Zacks Rank: Weyerhaeuser’s Zacks Rank #2 when combined with a negative ESP makes an earnings beat prediction difficult.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the industry you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:

TRI Pointe Group, Inc. (NYSE:TPH) , with an Earnings ESP of +5% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

JELD-WEN Holding, Inc. (NYSE:JELD) with an Earnings ESP of +7.69% and a Zacks Rank #2.

Louisiana-Pacific Corporation (NYSE:LPX) , with an Earnings ESP of +3.28% and a Zacks Rank #3.

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