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Factor Setting the Tone for Weyerhaeuser's (WY) Q3 Earnings

An improving housing market scenario is likely to reflect on Weyerhaeuser's (WY) third-quarter results. Yet, lower pricing in the Wood Product segment may weigh on its results.

This story originally appeared on Zacks

Weyerhaeuser Company WY is slated to report third-quarter 2021 results on Oct 29, before the opening bell.

In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 0.7% but revenues beat the same by 7.8%. Nevertheless, quarterly adjusted earnings of $1.37 per share increased significantly from the year-ago figure of 11 cents. Net sales for the quarter came in at $3,144 million, which increased 92.8% year over year.

Weyerhaeuser’s earnings missed the consensus mark in three of the last four quarters and beat the same on one occasion, with the average surprise being 7.1%.

- Zacks

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to 56 cents from 65 cents per share over the past 30 days. That said, the estimated figure indicates 7.7% growth from the year-ago earnings of 52 cents per share. The consensus mark for revenues is $2.27 billion, suggesting 7.5% year-over-year growth.

Factors to Note

Strong demand arising from residential construction is expected to benefit Weyerhaeuser’s third-quarter results. As the company’s performance is highly associated with the housing market, solid momentum in the markets served is expected to have aided Weyerhaeuser to propel the entire mix of businesses, including lumber, oriented strand board or OSB, and timber.

As announced during the second-quarter earnings call, the company expects third-quarter earnings and adjusted EBITDA for the Wood Products segment (contributing approximately 77% to revenues) to be significantly lower on a sequential basis due to a decline in lumber prices since late May. It expects sales volumes to increase from a year ago, mainly for lumber and OSB products. While the company expects manufacturing costs to improve, material costs may rise.

The Zacks Consensus Estimate for the Wood Products segment revenues is pegged at $638 million, implying a decrease from $1,207 million in the year-ago period and $2,629 million in the second quarter.

For the Timberland segment (contributing approximately 20% to revenues), Weyerhaeuser expects earnings and adjusted EBITDA to be lower than the second quarter. In the West, it expects slightly lower fee harvest volumes, and seasonally higher forestry as well as road expenses. In the South, the company expects higher fee harvest volumes, comparable average sales realizations, and per unit log and haul costs. It anticipates moderately higher export sales realizations and slightly lower domestic sales realizations. In the South, fee harvest volumes will likely be considerably higher than the second quarter.

The Zacks Consensus Estimate for the Timberland segment’s revenues is pegged at $517 million, implying an improvement from the third-quarter 2020 figure of $480 million but a decline from $541 million in second-quarter 2021.

For the Real Estate, Energy and Natural Resources segment (contributing about 3% to total revenues), Weyerhaeuser anticipates earnings to be up year over year for third-quarter 2021. Adjusted EBITDA is expected to be in line sequentially.

The Zacks Consensus Estimate for the Real Estate, Energy and Natural Resources segment revenues is pegged at $67 million, implying year-over-year growth from $65 million but a sequential decline from $110 million.

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company Price and EPS Surprise

Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Weyerhaeuser this time around. That 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 this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #4 (Sell).

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

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

KBR, Inc. KBR has an Earnings ESP of +2.66% and a Zacks Rank #2 at present.

Jacobs Engineering Group Inc. J has an Earnings ESP of +6.49% and a Zacks Rank #2.

North American Construction Group Ltd. NOA has an Earnings ESP of +0.88% and a Zacks Rank #2 currently.

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Weyerhaeuser Company (WY): Free Stock Analysis Report


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