Q3 Timber REIT Earnings: RYN Beats, PCL Misses Expectations

28 10 2010

From the desk of Neena Mishra, Director of Equity Research:

Rayonier (RYN) reported its Q3 results before market open on October 26, 2010. Net income for the quarter came in at $63 million or $0.77 per share, 19 cents ahead of the consensus estimates. The beat was mainly due to better-than-expected results by the Real Estate segment, where a $10 million conservation sale, previously expected to close in the fourth quarter, closed in the third quarter. The quarter also included more-than-expected non-strategic timberland sales. Outstanding results by the Performance Fibers segment (driven by continued strong demand for both Cellulose Specialties and Absorbent Materials) also contributed to the solid overall results. The Timber segment continued to benefit from higher stumpage prices locked-in early this year. Improved stumpage prices offset the lower sales volume in the Eastern Region while the Western Region benefitted from stronger export demand. Management expects FY 2010 earnings to be at the higher end of their guidance range of $2.05 to $2.20 per share.

Plum Creek (PCL) reported its Q3 results after market close on October 25, 2010.  Earnings for the quarter came in at $32 million or $0.20 per share, on revenue of $259 million, compared with the consensus estimates of earnings of $0.24 per share. The miss can largely be attributed to lower real estate sales, where revenues of $39 million fell below the company’s guidance of $50 to $55 million. Timber segment earnings improved due to seasonally higher harvest levels and slightly higher pulpwood pricing in the Northern Segment and higher harvest volume (partially offset by slightly lower pulpwood pricing) in the Southern segment. Manufacturing income was lower from the previous quarter (though higher than the estimates) since the volumes declined (most notably for MDF as the temporary demand increase earlier created by the Chilean earthquake vanished), while the pricing was mixed. Management now expects the FY 2010 earnings to be between $1.28 and $1.35 per share.

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