On Friday, Weyerhaeuser (NYSE:WY) will release its quarterly report, and shareholders have been nervous lately about the forest-products REIT's ability to weather a cold winter and keep boosting its revenue and earnings. With rivals Plum Creek Timber (NYSE:PCL.DL) and Louisiana-Pacific (NYSE:LPX) aiming to take advantage of hoped-for expansion in the housing market and construction industry, Weyerhaeuser has to make sure that it can respond to changing economic conditions and capitalize on opportunities when they arise.

Weyerhaeuser owns and manages millions of acres of raw timberland, with holdings primarily in the Pacific Northwest. Based on those holdings, Weyerhaeuser made the decision several years ago to join Plum Creek Timber in becoming a real-estate investment trust, giving it tax advantages and providing investors with regular distributions of income in order to comply with REIT rules. Yet Weyerhaeuser also has an extensive business in finished wood products, and that gives it exposure to the ups and downs of the housing industry. With some doubts arising recently about the strength of the housing recovery, can Weyerhaeuser overcome new challenges? 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.

Source: Mickael Delcey.

Stats on Weyerhaeuser

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$2.08 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Which way will Weyerhaeuser earnings move this quarter?
Analysts have gotten more pessimistic in recent months about Weyerhaeuser earnings, cutting a nickel per share from their first-quarter estimates and more than 5% off their full-year 2014 projections. The stock has fallen, dropping about 7% since mid-January.

Weyerhaeuser's fourth-quarter earnings report revealed how much growth the company has experienced recently. For the quarter, Weyerhaeuser's revenue climbed almost 13%, boosting adjusted earnings by nearly 10%. The quarter capped a strong 2013 for Weyerhaeuser, which doubled its adjusted earnings due in part to its purchase of Longview Timber. It also agreed to combine its real estate operations with Tri Pointe Homes, giving Weyerhaeuser an exit strategy for its homebuilding exposure and allowing it to focus more on its timber and wood-products businesses.

Source: Sean Mack.

One key to success for Weyerhaeuser has been its strategically located assets in the Pacific Northwest. That location gives Weyerhaeuser easy access to Asian markets, where high demand for wood products for construction purposes has driven growth. At the same time, though, its building-materials business also relies on healthy real-estate markets in the U.S. in order to push sales higher. It also explains why Weyerhaeuser has an advantage over Plum Creek Timber, which has more extensive timber assets in the South.

Yet the real question Weyerhaeuser faces along with Louisiana-Pacific and Plum Creek Timber is whether the housing and construction markets will continue to expand. Recent housing data suggested a steep drop in home sales activity in recent months. Most economists expect those figures to reverse themselves in the near future as weather conditions improve, but if they don't then Weyerhaeuser could find itself struggling to balance supply with falling demand for its products.

In the Weyerhaeuser earnings report, watch to see how the timber REIT responds to changing industry conditions. With so much riding on long-term growth, Weyerhaeuser can afford to be patient even if the housing market's recovery starts to slow.

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