What's In The Cards For Rayonier (RYN) In Q4 Earnings?

Rayonier Inc. (NYSE:RYN) , a timberland real estate investment trust (REIT), is scheduled to report fourth-quarter and 2017 results on Feb 7, after the market closes. The company’s pro forma net income per share is expected to grow year over year while revenues for the quarter are likely to decline.

In third-quarter 2017, Rayonier’s pro forma net income per share came in at 19 cents, comfortably beating the Zacks Consensus Estimate of 5 cents. Results highlighted encouraging performance of Pacific Northwest and New Zealand Timber segments on account of higher harvest volumes and an increase in saw timber prices. However, performance in the Real Estate segment was disappointing primarily due to a decline in the number of acres sold.

Over the trailing four quarters, Rayonier beat estimates on three occasions, delivering an average positive earnings surprise of 96.01%. The graph below depicts this surprise history:

Rayonier Inc. Price and EPS Surprise

Factors to Consider

Rayonier’s portfolio of timberlands enjoys geographical diversity and is located in the productive timber-producing regions of the United States. Recent developments in the field of biogenetics and cloning have significantly benefited this timberland REIT’s business.

The company is aimed at consistently monetizing higher and better uses (HBU) properties through rural land sales for enhancing its portfolio value. Additionally, the favorable demand-supply dynamics have reinforced the company’s pricing power.

However, Rayonier faces intense competition in the market from national and local players. Increasing rivalry from a variety of substitute products, like non-wood and engineered wood products, only add to its woes. The company is subject to foreign exchange fluctuations because a number of its segments export products. Moreover, timberland business is governed by federal rules and state forestry commissions that all timberland REITs have to comply with.

The Zacks Consensus Estimate of $23.7 million for operating income from the overall timber segment reflects a steep decline from the prior-quarter figure of $31.9 million

Further, the Zacks Consensus Estimate for operating income from the real estate segment is currently pegged at $5.3 million. This compares unfavorably with the previous quarter’s figure of $11.4 million.

Moreover, prior to the fourth-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for net income per share for the soon-to-be-reported quarter remained unchanged at 9 cents, over the past month. Nevertheless, this indicates an 80% increase year over year.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $165.6 million, indicating a year-over-year decline of 24.9%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $724.7 million reflecting a year-over-year decline of 8.1%. Also, the consensus estimate for net income per share is 55 cents, reflecting a year-over-year decline of 1.8%.

Earnings Whispers

Our proven model does not conclusively show that Rayonier will likely beat earnings estimates this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

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

Zacks ESP: The Earnings ESP for Rayonier is -35.14%.

Zacks Rank: Rayonier’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

The stock has gained 8.5% in the past six months, underperforming 15% growth recorded by the industry it belongs to.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider as our model shows these have the right combination of elements to come up with a positive surprise this time around:

CubeSmart (NYSE:CUBE) is slated to release fourth-quarter results on Feb 15. The stock has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamondrock Hospitality Co. (NYSE:DRH) is scheduled to report quarterly numbers on Feb 26. The stock has an Earnings ESP of +4.76% and a Zacks Rank #3.

Weingarten Realty Investors (NYSE:WRI) , slated to release quarterly numbers on Feb 21, has an Earnings ESP of +0.34% and a Zacks Rank of 3.

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