Rayonier (RYN) Down 0.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Rayonier (RYN). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rayonier due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Rayonier Misses on Q1 Earnings & Revenues, Trims View

Rayonier reported first-quarter 2020 net income attributable to the company of $25.9 million or 20 cents per share. This included an income from a Large Disposition sale of $28.7 million, which was partially offset by the costs related to the merger with Pope Resources. The company had earned $24.8 million or 19 cents per share in the year ago quarter.

The pro forma net loss came in at $0.3 million or $0.00 per share. This missed the Zacks Consensus Estimate of earnings of 3 cents per share.

The company’s quarterly performance reflects a declining operating income in Southern Timber and New Zealand Timber.

Revenues were down 25.3% year over year to $143.1 million on a pro forma basis and missed the Zacks Consensus Estimate of $165.6 million.

The coronavirus pandemic and the ensuing uncertain situation has resulted in the company revising its full-year outlook.

Segmental Performance

During the first quarter, operating income at the company’s Southern Timber segment came in at $15.1 million, down from the prior-year quarter’s $21.5 million. This downside resulted from lower non-timber income, net-stumpage prices and volumes. However, the negatives were partially offset by a drop in lease related expenses and lower depletion rates.

The Pacific Northwest Timber segment reported an operating loss of $0.9 million, narrower than the operating loss of $3.7 million posted in first-quarter 2019. This was mainly due to higher net stumpage prices, non-timber income and reduced depletion rates, partially offset by an increase in overhead costs and other variable costs.

The New Zealand Timber segment recorded operating income of $5.4 million, down from the year-earlier number of $15.7 million. Results indicate lower net stumpage prices, volumes, non- timber income, higher overhead costs and roading costs, partly negated by lower depreciation and software amortization expenses, and favorable foreign-exchange impact.

Real Estate’s operating income of $26.8 million was significantly up from the year-ago tally of $10 million. This chiefly resulted from a large disposition sale of $116 million in Mississippi, comprising an area of 66,946 acres at an average price of $1,733 per acre.

The Trading segment reported break-even results in the quarter against an operating income of $0.5 million recorded in the year-ago quarter. This is mainly due to lower volumes and prices prevailing due to the coronavirus pandemic hurting major export markets.

Liquidity

Rayonier ended the first quarter with $132.4 million in cash and cash equivalents, up from $68.7 million recorded as of Dec 31, 2019. Total long-term debt was $1.1 billion, up 8.4% from $973.1 million as on Dec 31, 2019.
During the reported quarter, the company also repurchased 3.2 million common shares at an average price of $20.71 per share. As of March 31, 2020, the company had 129.2 million common shares outstanding and $87.7 million remaining on its current share-repurchase authorization.

Outlook

Rayonier has revised its full-year outlook in light of the coronavirus pandemic. The company now projects 2020 net income attributable to Rayonier of $33-$46 million and adjusted EBITDA of $200-$230 million. The company had earlier estimated 2020 net income attributable to Rayonier of $47-$57 million and adjusted EBITDA of $245-$270 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 55.56% due to these changes.

VGM Scores

Currently, Rayonier has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Rayonier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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