Will Plum Creek Timber Keep Growing Like a Weed?
Next Monday, Plum Creek Timber will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Plum Creek is structured as a real estate investment trust, but its business is timber, growing trees and producing lumber, plywood, and other wood products. After years of poor demand, things are looking up for the industry, and Plum Creek is looking to get its share of the current opportunity. Let's take an early look at what's been happening with Plum Creek Timber over the past quarter, and what we're likely to see in its quarterly report.
Stats on Plum Creek Timber
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Can Plum Creek Timber stand tall this quarter?
Analysts have had a fairly stable view of Plum Creek's earnings potential in recent months, having raised their estimates for the just-ended quarter by $0.02 per share, but holding their full-year 2013 estimates flat. But the stock has done quite a bit better, rising more than 13% since mid-January.
The key to Plum Creek's success is the price of lumber, and lately, lumber prices have soared. On one hand, strong demand from a reinvigorated housing industry has doubled the price of lumber since 2009. On the other, timberlands have gotten consumed by infestations of the mountain pine beetle, causing supply constraints, and limiting the amount of available lumber for harvesting. That has sent shares of Plum Creek and archrival Weyerhaeuser much higher, along with stocks of smaller timber companies.
But Plum Creek has an advantage over Weyerhaeuser in that much of Plum Creek's assets are in the eastern U.S., which has thus far withstood the threat of the pine mountain beetle better than the U.S. West. Plum Creek has also been able to translate that advantage into a slightly higher dividend yield.
Despite timber's strength, Plum Creek has been trying to diversify into other areas, as well. Earlier this year, the company made a deal with Vulcan Materials whereby Plum Creek will get a royalty on the sale of Vulcan's crushed stone. The move should help it get more in line with Weyerhaeuser and Rayonier, both of which are less reliant on raw timberland than Plum Creek.
In Plum Creek's report, watch to see whether CEO Rick Holley expands on his comments from last quarter regarding mill-operations activity. If mills are still running near capacity in order to take advantage of demand, it could point to a new phase for the upswing in timber companies like Plum Creek.
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The article Will Plum Creek Timber Keep Growing Like a Weed? originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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