Weyerhaeuser's (WY) Q4 Earnings Miss, Sales Beat Estimates

Weyerhaeuser Company (NYSE:WY) reported mixed fourth-quarter 2019 results, with earnings missing the Zacks Consensus Estimate, while net sales beating the same.

The company reported adjusted earnings of 3 cents, which missed the consensus mark of 7 cents by 57.1% and declined 70% from the year-ago quarter’s figure of 10 cents.

Net sales during the quarter amounted to $1,548 million, beating the consensus mark of $1,524 million by 1.6%. However, the reported figure fell 5.4% from $1,636 million reported in the prior-year quarter. Its two major segments reported significantly lower net sales on a year-over-year basis.

Weyerhaeuser Company Price, Consensus and EPS Surprise

Segments Details

The company currently operates through three business segments —Timberlands; Real Estate, Energy and Natural Resources; and Wood Products.

Timberlands’ net sales (including inter-segment sales of $122 million) during the quarter came in at $510 million, down 11.5% from the year-ago quarter’s figure of $576 million. Lower average log sales realizations and fee harvest volumes in the South as well as seasonally lower Western road and forestry spending caused the decline.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $158 million, down 16% from $188 million in the year-ago quarter.

Net sales in Real Estate, Energy and Natural Resources amounted to $46 million, down 54.9% from $102 million reported in the prior-year quarter. Adjusted EBITDA also fell 58.9% to $37 million from $90 million in the year-ago quarter. Earnings and adjusted EBITDA fell due to fewer real estate sales as well as lower construction materials and energy royalties in the Energy & Natural Resources business.

Sales in the Wood Products segment totaled $1,115 million, up 2.6% from $1,087 million in the prior-year quarter. Adjusted EBITDA came in at $110 million, up 66.7% from the year-ago quarter’s figure of $66 million.

Operating Highlights

During the quarter, gross profit plunged more than 15% to $247 million from $291 million in the prior-year quarter. Adjusted EBITDA was $260 million in the quarter, down nearly 25% from $346 million in the year-ago quarter.

Financial Highlights

As of Dec 31, 2019, Weyerhaeuser had cash and cash equivalents of $139 million, down from $334 million at 2018-end. Long-term debt was $6,147 million versus $5,419 million at the end of 2018.

Net cash from operations were $966 million at the end of 2019, down from $1,112 million at 2018-end.

2019 Highlights

For 2019, total revenues were $6,554 million, down 12.3% year over year. Adjusted earnings for the year ended Dec 31, 2019 was reported at 39 cents, down from the year-ago quarter’s figure of $1.18 per share.

Adjusted EBITDA was reported at $1,276 for 2019, 37.2% down from $2,032 in 2018. The company’s performance in the year was significant impacted from a sluggish housing market, global trade uncertainty and persistent challenges in commodity prices.

Q1 2020 Outlook

For the first quarter, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment.

Geographically, in the West, the company expects higher domestic and export log sales volumes, moderate average domestic log sales realizations and lower road spending. In the South, the company anticipates lower fee harvest volumes and comparable average log sales realizations.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates significantly higher earnings and adjusted EBITDA compared with fourth-quarter levels. For 2020, the segment’s adjusted EBITDA is estimated at nearly $255 million, including the effect of fewer available real estate acres post divestitures of Montana and Michigan timberlands.

In the Wood Products segment, the company predicts earnings and adjusted EBITDA (before any improvement in average sales realizations) to be slightly higher than fourth-quarter levels. Weyerhaeuser expects to witness seasonally improved operating rates and manufacturing costs for engineered wood products along with slightly higher sales volumes for lumber and oriented strand board.

Zacks Rank & Key Picks

Weyerhaeuser currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Building Products - Wood industry are PotlatchDeltic Corporation (NASDAQ:PCH) , JELD-WEN Holding, Inc. (NYSE:JELD) and Trex Company, Inc. (NYSE:TREX) each carrying a Zacks Rank #2 (Buy).

PotlatchDeltic has four-quarter positive earnings surprise of 44%, on average.

JELD-WEN Holding has three-five year expected earnings per share growth rate of 11.8%.

Trex Company 2020 earnings is expected to rise 22.5%.

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