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Why Shares of Rayonier Inc. Jumped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rayonier (NYSE: RYN  ) jumped 10% today after the company announced earnings and said that it would split into two businesses.

So what: First, fourth-quarter earnings showed a 35% rise in revenue to $520.2 million and a profit of $80 million, or $0.62 per share, $0.03 better than a year ago. Results topped expectations, but the bigger news was the spin-off.  

The performance fibers business will be spun off into a new publicly trading company, and Rayonier will focus on forest resources and real estate. The deal is expected to be completed mid-year.  

Now what: Spin-offs are often done when companies think they can get higher valuations as stand-alone companies than they can together. That's the driver of the split, as management sees bullish trends in both cellulose fibers and the housing market -- and with different capital needs, now was the time to split. I don't think this fundamentally changes either company, but the market sees more value with them separate, and new investors will be able to bet on more specific parts of the market.

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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Related Tickers

8/28/2015 1:06 PM
RYN $23.10 Down -0.12 -0.52%
Rayonier, Inc. CAPS Rating: *****