Founded in 1990, Weyerhaeuser Company (WY) is one of the world’s largest private owners of timberlands. It controls approximately 11 million acres of timberlands in the United States and manages additional timberlands under long-term licenses in Canada. The company is also  one of the largest manufacturers of wood products in North America.

There has been a noticeable uptick in real estate activity in the United States following the 2020 Presidential elections. From home financing to home construction, President Biden’s plans are focused on housing affordability. His proposed $15,000 tax credit for first-time home-buyers would help those who have been unable to purchase homes due to rising prices, or other personal financial problems. In fact, many potential purchasers are currently house hunting to take advantage of historically low mortgage rates. WY is particularly well positioned to capitalize on this environment with its expanding geographic footprint and solid operating model.

The company’s strong financial position and unmatched product portfolio have allowed helped it  gain 6.7% over the past year. This impressive performance combined with several other factors has earned  WY a Buy rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates WY:

Trade Grade: A

WY is currently trading higher than its 50-day and 200-day moving averages of $31.83 and $26.88, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 16.8% return over the past three month reflects solid short-term bullishness.

WY’s net sales for the third quarter ended September 30, 2020 have  increased 29.4% sequentially to $2.11 billion. The company’s adjusted has EBITDA increased 141.9% year-over-year to $745 million, while its net earnings grew 185.9% from the year-ago value to $283 million. WY’s EPS increased 372.7% sequentially to $0.52 over this period.

In November, WY announced the completion of two  transactions in which it purchased 85,000 acres of timberlands in mid-coastal Oregon  and sold 149,000 acres in southern Oregon. The two transactions had a net cost to the WY of   approximately $40 million in cash. These deals should enhance the company’s portfolio and help it gain access to key domestic and export markets, thereby strengthening its ability to deliver long-term value to its shareholders.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, WY is well positioned. The stock is currently trading 7.2% below its 52-week high of $34.71, which it hit on December 17.

The company’s revenue has grown  at a CAGR of 4% over the past five years, while its EPS increased at a CAGR of 9.8% over the past three years. This can be attributed to the company’s industry-leading performance and prudent capital usage.

Peer Grade: A

WY is currently ranked #4 of 58 stocks in the REITS – Diversified industry. Other popular stocks in this industry are Brookfield Property Partners L.P. (BPY), Arbor Realty Trust, Inc. (ABR) and STORE Capital Corporation (STOR)

BPY, ABR, and STOR have declined 10.7%, 3.5%, and 17.6%, respectively, over the past year. This compares to WY’s 6.7% returns over this period.

Industry Rank: D

The REITS – Diversified industry is ranked #112 of  123 StockNews.com industries. The companies in this industry primarily own and operate timberlands and other income-producing real estate across a wide spectrum of properties, including retail, office, industrial, and multifamily residential buildings.

Construction project cancellations and  supply chain bottlenecks in the real estate market caused by the coronavirus pandemic have presented a wide range of challenges to this industry. Along with an  evolving financial landscape, the pandemic has caused tectonic shifts in the way people live, work, and play, which has put considerable pressure on certain property sectors. With many construction sites still facing operational restrictions, much needs to be done to facilitate the recovery of the industry in the upcoming months.

Overall POWR Rating: B (Buy)

WY is rated Buy due to its impressive financials, short- and long-term bullishness, and solid price momentum, as determined by the four components of our overall POWR Rating.

Bottom Line

WY is uniquely positioned to benefit from a Biden Presidency despite gaining 6.7% over the past year. Predicated on  the Biden administration reviving confidence  in the real estate market, which buyers and renters have been lacking due to the COVID-19 pandemic, housing demand is  expected to return to normal. WY is well-positioned  to capitalize on this opportunity.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for WY. It has an average broker rating of 1.5, indicating favorable analyst sentiment. Of 9 Wall Street analysts that rated the stock, 3 rated it a “Strong Buy.” 

A consensus EPS estimate of $0.48 for the quarter ending March 31, 2021, represents a 166.7% improvement year-over-year. The consensus revenue estimate of $1.93 billion for the next quarter represents an 11.9% increase from the same period last year.

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WY shares were trading at $33.02 per share on Thursday morning, up $0.82 (+2.55%). Year-to-date, WY has declined -1.52%, versus a 1.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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