Yahoo Finance Can Weyerhaeuser Beat Q4 Earnings on Housing Recovery? - Analyst Blog
Weyerhaeuser Company (WY) is scheduled to report fourth-quarter 2014 results on Jan 30, 2015 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at 28 cents.
The company fared well in the last four trailing quarters, posting better-than-expected results in three out of four quarters with a positive average earnings surprise of 10.17%. In the last reported quarter, Weyerhaeuser reported earnings of 33 cents per share, beating the Zacks Consensus Estimate of 30 cents by 10%. Let us see how things are shaping up prior to this quarter’s announcement.
Factors Likely to Influence Q4 Results
The U.S. housing market strengthened further in fourth-quarter 2014, as evident from a 2.8% sequential increase in average housing starts in the quarter. Also, completed private construction experienced growth compared with the year-ago quarter. Housing starts are expected to be roughly 1 million for full year 2014.
Weyerhaeuser, especially the Timberlands and Wood Products business segments, is set to gain from the recovery in the U.S. housing market. Further, proceeds from the divestiture of real estate business can be utilized for expansion of the company’s core enterprises.
Moreover, Weyerhaeuser’s Cellulose Fibers segment will gain from lower maintenance expenses, while the company’s efforts to reduce controllable costs will boost its operating earnings.
Earnings Whispers
Our proven model conclusively shows that Weyerhaeuser is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is the case here as you will see below.
Zacks ESP: Weyerhaeuser currently has an ESP of +3.57% for fourth-quarter 2014. This is because the Most Accurate Estimate of 29 cents per share stands above the Zacks Consensus Estimate of 28 cents. This is a likely and meaningful indicator of a positive earnings surprise.
Zacks Rank: Weyerhaeuser currently carries a Zacks Rank #3 (Hold).
The combination of Weyerhaeuser's Zacks Rank #3 and +3.57% ESP makes us confident of an earnings beat at the company in the fourth quarter.
However, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are other companies in the construction sector you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
ServiceMaster Global Holdings, Inc. (SERV), with an Earnings ESP of +10.53% and a Zacks Rank #2 (Buy).
Potlatch Corporation (PCH), with an Earnings ESP of +7.50% and a Zacks Rank #3.
United Rentals, Inc. (URI), with an Earnings ESP of +3.54% and a Zacks Rank #3.
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WEYERHAEUSER CO (WY): Free Stock Analysis Report
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UTD RENTALS INC (URI): Free Stock Analysis Report
SERVICEMASTR GH (SERV): Free Stock Analysis Report
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