Plum Creek Timber Co. Inc. PCL is expected to report fourth-quarter and full-year 2015 results on Feb 3, 2016, after the market close.
Last quarter, the company had posted a positive earnings surprise of 13.73%. In fact, for the trailing four quarters, Plum Creek has delivered positive earning surprises with an average beat of 21.15%.
Let’s see how things have shaped up for this announcement.
Factors to Consider
In Nov 2015, Plum Creek and Weyerhaeuser Co. WY had inked a merger deal to create a $23-billion timber, land and forest products company, largest in the U.S. The combined entity will own over 13 million acres of productive timberland, which will help it reap economies of scale and capitalize on housing recovery. Subject to customary closing conditions and approval from shareholders of both the companies, the deal is likely to close in Mar or Apr 2016.
Further, we believe that Plum Creek’s geographically diversified private timberland portfolio enables it to benefit from large economies of scale and capitalize on the increasing demand for timber. This, in turn, helps it offset the negative effect of cyclical commodity pricing. This diversified timber and land base also provides the firm with excellent operational flexibility to adapt with changing market conditions.
However, issues like seasonality in the forest products industry, sluggish recovery of the residential construction market and cut-throat competition with national and local players keep us concerned.
Plum Creek’s activities during the quarter were inadequate to win analysts’ confidence. Consequently, the Zacks Consensus Estimate for the stock remained unchanged at 16 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Plum Creek will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.
Zero Zacks ESP: That is because both the Most Accurate estimate and the Zacks Consensus Estimate per share currently stand at 16 cents, which translates into an Earnings ESP of 0.00%.
Zacks Rank #2: Plum Creek’s Zacks Rank #2, when combined with a zero Earnings ESP, makes surprise prediction difficult.
Note that, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Stocks to Consider
Here are two stocks in the REIT sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:
Vornado Realty Trust VNO has an Earnings ESP of +4.65% and a Zacks Rank #2. The company will release results on Feb 16.
Healthcare Realty Trust Incorporated HR has an Earnings ESP of +2.44% and a Zacks Rank #2. The company will report on Feb 16.
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PLUM CREEK TMBR (PCL): Free Stock Analysis Report
WEYERHAEUSER CO (WY): Free Stock Analysis Report
VORNADO RLTY TR (VNO): Free Stock Analysis Report
HEALTHCARE RLTY (HR): Free Stock Analysis Report
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