Weyerhaeuser (WY 0.77%) reported earnings for its third quarter this morning, and the results were mixed for the REIT, pushing shares down slightly this morning as a result. With analysts expecting $0.18 in earnings per share and revenues of $1.79 billion, the timber REIT recorded earnings of $0.22 per share and revenue of $1.77 billion. Earnings were off 25% from last year, though last year's third quarter was boosted by one-time income from selling a couple of businesses and a tax gain. Meanwhile, despite missing analysts' estimates, revenue did increase 13% from the same quarter last year.
What I was watching
I was particularly interested in seeing improvement, or at least the status quo, in its wood products segment. With a focus on products used primarily in construction of homes and other buildings, and housing starts at their highest levels in four years, Weyerhaeuser is poised to reap some benefit. The numbers bear this out, with revenue up 35% in the segment during the quarter to $816 million, nearly half of the quarterly revenue.
This offset a decline in revenue from its cellulose fibers business, which declined slightly to $459 million. It didn't help that average pulp prices were flat during the quarter, but a larger slide was prevented by significantly lower maintenance costs and increased production.
What to expect going forward
Earlier this month, the company announced that they would be increasing its quarterly dividend by 13%, up to $0.17 per share. Though its current 2.5% yield trails others in the industry like Plum Creek Timber (PCL +0.00%) and its 3.8% yield, Weyerhaeuser seems poised to continue benefiting from housing's recovery. Though it anticipates lower earnings in the wood products business during the upcoming quarter due to declines in seasonal demand -- it is winter after all -- future quarters should see an increase as more new houses continue to be built. It definitely is an interesting option in a small corner of the market.
