Timber REITs own and operate timberlands to generate revenues. And with the consistent rise in housing and lumber prices of late, timber REITs are expected to achieve stable growth in the near term.
Because demand for residential and commercial spaces is robust, the timber REITs’ sector is poised to outperform the broader market despite an apparent supply crunch. This optimistic investor sentiment is evidenced by the iShares Global Timber & Forestry ETF’s (WOOD) 4.6% returns in the past three months. Furthermore, given surging market volatility currently, due to record high inflation and supply chain disruptions, REITs are wise bets because they pay dividends.
Given this backdrop, we believe fundamentally sound timber REITs Weyerhaeuser Company (WY), PotlatchDeltic Corporation (PCH), and CatchMark Timber Trust, Inc. (CTT) could be solid additions to one’s portfolio now. These stocks have an overall B (Buy) rating in our proprietary POWR Ratings system.
Weyerhaeuser Company (WY)
Federal Way, Wash.-based WY is one of the world's largest private owners of timberlands, which began operations in 1900. It owns or controls approximately 11 million acres of timberlands in the U.S. and manages additional timberlands under long-term licenses in Canada.
On Jan. 28, 2022, Devin W. Stockfish, president and CEO, said, “As we enter 2022, we continue to be encouraged by strong demand fundamentals that will drive growth for our businesses and remain focused on creating superior value for shareholders through our unmatched portfolio of assets, industry-leading operating performance, strong ESG foundation and disciplined capital allocation.”
WY’s net sales increased 6.9% year-over-year to $2.21 billion for the fiscal fourth quarter, ended Dec. 31, 2021. Its net earnings came in at $416 million, up 42.5% year-over-year, while its EPS increased 41% year-over-year to $0.55. The company’s adjusted EBITDA increased 6.7% sequentially to $176 million.
Analysts expect WY’s revenue to come in at $9.51 billion in its fiscal 2022. Its EPS is estimated to grow 5% per annum over the next five years. Over the past year, the stock has gained 19.1% in price to close yesterday’s session at $40.98.
WY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
WY has a B grade for Value, Momentum, Sentiment, and Quality. Within the REITs - Diversified industry, it is ranked #1 of 49 stocks. Click here to see the additional POWR Ratings for Growth and Stability for WY.
PotlatchDeltic Corporation (PCH)
PCH is a leading Real Estate Investment Trust (REIT) in Spokane, Wash., that owns 1.8 million acres of timberlands in Alabama, Arkansas, Idaho, Louisiana, Minnesota, and Mississippi. A leader in sustainable forest management, PCH is committed to environmental and social responsibility and responsible governance.
On Jan. 31, 2022, Eric Cremers, president and CEO, PCH, said, "Our leverage-to-lumber strategy capitalized on historic lumber prices and is well situated to continue to drive strong financial performance into 2022. Additionally, we returned $388 million to shareholders in 2021, including a special dividend in December, and are well-positioned to continue growing shareholder value through our disciplined and opportunistic capital allocation strategy.”
PCH’s cash and cash equivalents came in at $296.15 million for the period ended Dec. 31, 2021, compared to $252.34 million for the period ended Dec. 31, 2020. Its total current assets came in at $421.18 million, compared to $357.12 million, for the same period. Also, the company’s total assets were $2.54 billion, compared to $2.38 billion, for the same period.
PCH’s revenue is expected to be $1.16 billion in fiscal 2022. Its EPS is expected to increase 5% per annum over the next five years. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, PCH has gained 6.3% in price to close yesterday’s session at $53.08.
PCH has an overall B grade equating to a Buy in our POWR Ratings system. It has a B grade for Value, Momentum, and Sentiment. It is ranked #9 in the REITs - Diversified industry. Click here to see the additional ratings for PCH (Growth, Stability, and Quality).
CatchMark Timber Trust, Inc. (CTT)
CTT in Norcross, Ga., seeks to deliver stable per share cash flow from disciplined acquisitions and superior management of prime timberlands in high-demand U.S. mill markets.
On Nov. 4, 2021, Brian M. Davis, CTT’s President and CEO said: " Once again, we achieved solid quarterly operating results highlighted by significantly higher year-over-year timber sales pricing for both pulpwood and sawtimber, which continues to hold premiums over market averages in our premier U.S. South timberland markets.”
For its fiscal third quarter, ended Sept. 30, 2021, CTT’s net income came in at $23.25 million, compared to a $4.15 million loss in the year-ago period. Its EPS was $0.48, compared to a $0.09 loss per share in the previous period. And its cash and cash equivalents came in at $24.57 million for the period ended Sept. 30, 2021, compared to $11.92 million, for the period ended December 31, 2020.
Analysts expect CTT’s revenue to be $91.04 million in its fiscal 2022. It surpassed the EPS estimates in three of the trailing four quarters. The stock closed yesterday’s trading session at $8.10.
It is no surprise that CTT has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, Momentum and Sentiment.
CTT is ranked #3 in the REITs - Diversified industry. We have also rated the stock for Stability and Quality. Click here to get all the CTT ratings.
WY shares were trading at $41.76 per share on Tuesday afternoon, up $0.78 (+1.90%). Year-to-date, WY has gained 1.41%, versus a -5.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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