Is Weyerhaeuser More at Risk Than Plum Creek Timber and Potlatch?

Weyerhaeuser (NYSE: WY  ) will release its quarterly report on Friday, and the timber company has enjoyed a solid year of growth so far. But with comparisons becoming tougher, can Weyerhaeuser both sustain its own upward earnings trajectory and keep competitors Potlatch (NASDAQ: PCH  ) and Plum Creek Timber (NYSE: PCL  ) at bay?

Weyerhaeuser has extensive timber and forest-products assets that are primarily located in the western half of the U.S., and as the housing market has revived, timber prices have jumped substantially. But one big open question is whether the infestation of the mountain pine beetle that has already hit western Canada will spread south of the border into U.S. forests as well, potentially hurting Weyerhaeuser more than the more eastern-focused Plum Creek. Let's take an early look at what's been happening with Weyerhaeuser over the past quarter and what we're likely to see in its report.

Stats on Weyerhaeuser

Analyst EPS Estimate

$0.21

Change From Year-Ago EPS

(4.5%)

Revenue Estimate

$2.09 billion

Change From Year-Ago Revenue

17.8%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will Weyerhaeuser earnings give investors another nice surprise?
In recent months, analysts have pushed down their views on Weyerhaeuser earnings substantially, cutting third-quarter estimates by 25% and more modestly reducing their views for the full 2013 and 2014 years. The stock hasn't been adversely affected, though, having risen 4% since late July.

Coming into the quarter, Weyerhaeuser's past results have been quite impressive. In the second quarter, Weyerhaeuser quadrupled its net income from the year-ago period excluding one-time items, with timberland operations and the wood-products business contributing roughly equal contributions to the company's overall earnings. Weyerhaeuser predicted some seasonal weakness in the third quarter from the timberland segment, though, and it also expects wood-products earnings to fall.

Still, Weyerhaeuser has definitely seen signs of improvement in the housing market. In August, the company said it would restart production at an Alabama factory that had been closed for four years after the housing boom ended. Weyerhaeuser cited stronger demand from builders for the engineered wood products that the plant makes, and continued strength could lead to more capacity increases in the future. Plum Creek reopened long-closed sawmills earlier this year as well, and despite missing expectations, Potlatch included 19% gains in net income and a 4% jump in revenue when it reports its third-quarter results earlier this week.

The big question for Weyerhaeuser is whether its recent $2.65 billion acquisition of Longview Timber from Brookfield Asset Management and Brookfield Infrastructure Partners (NYSE: BIP  ) will pay off for the company. Having high-quality timberland in the Pacific Northwest gives Weyerhaeuser easy access to export markets in Asia, but it also gives Weyerhaeuser greater concentration in areas that could potentially become vulnerable the mountain pine beetle.

In the Weyerhaeuser earnings report, watch to see how the company does with both its timber and wood-products segments. The results should give you insight not just into Weyerhaeuser's prospects but those of the housing market as a whole.

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