Weyerhaeuser Falls as Forecast Disappoints

Tickers in this article: WY

NEW YORK (TheStreet) - Weyerhaeuser fell 3% by Monday afternoon after the forest products company said profit for the current quarter is expected to fall sequentially because of sluggish macro-economic conditions.

Shares were falling 2.8% to $28, trimming the company's 2013 gain to 0.6%. The S&P 500 has gained 22% this year.

Earnings per share continue to grow, beating Wall Street consensus for the fourth-consecutive quarter. Weyerhaeuser was expected to report $0.30 in the second quarter, but outstripped expectations by generating $0.35 a share. A year ago, the company only had earnings of $0.09 a share.

Sales increased 19.4% year over year to $2.14 billion. Timberland products increased 27% in the same period. Timberland accounts for almost 16% of the company's total revenue, or $333 million. Wood products also saw growth this year. The division generates 49.7% of Weyerhaeuser's revenue. The department increased sales by 37% to $1.1 billion.

The second quarter ended as the Federal Way, Washington-based company acquired Longview Timber LLC for $2.65 billion. Weyerhaeuser paid $4109 an acre; the company purchased 645,000 acres. 29 million common shares were issued to allow for the acquisition.

"We moved forward both strategically and operationally with the acquisition of Longview Timber LLC and by delivering strong operating results in this improving housing market," said Weyerhaeuser president and chief executive officer Dan Fulton.

Analysts are split on their valuations of the equity. Citi has rated Weyerhaeuser as a buy and a $35 price target, while UBS held the stock at a sell. Many are concerned that timber sales will face a typical seasonal dip in the third quarter and continue to be at the mercy of the U.S. housing market. Third quarter forcasts have been shaved by $0.02.

We think recent choppiness in housing data, rising rates, and wood products seasonality (prices typically soften during the summer) have sapped some near-term enthusiasm for WY shares," wrote Citi analysts, led by Anthony Pettinari.

-- Written by Robert Arenella in New York

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