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In the last reported quarter, the company’s earnings had surpassed the Zacks Consensus Estimate by 52.4%, but net sales missed the same by 1.5%. Quarterly adjusted earnings and net sales for the quarter, however, decreased 69.8% and 32.8%, respectively.
Weyerhaeuser’s earnings beat the consensus mark in all the last four quarters, with the average surprise being 40.8%.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has declined to 33 cents from 38 cents over the past 30 days. The estimated figure indicates a decrease of 21.4% from the year-ago level. The consensus mark for revenues is $2.12 billion, suggesting a 7.1% year-over-year decline.
Lower-than-anticipated Western log sales, lumber sales volume and EWP margins may have weighed on the company’s third-quarter performance despite operational excellence improvements and disciplined capital allocation moves of the company. Also, lower lumber prices are expected to have weighed on Weyerhaeuser’s third-quarter 2023 performance.
Meanwhile, transportation and resin shortages have been a headwind for the Wood business. Higher raw material costs for oriented strand board or OSB web stock, resin and veneer may have also been a pressing concern.
Nonetheless, solid demand from repair and remodeling activity, as well as from new residential construction activity, are expected to have aided quarterly results to some extent.
In late September 2023, WY updated its expectations for the third quarter. The company expects the Wood Products segment’s adjusted EBITDA to be moderately higher sequentially in the third quarter versus a prior expectation of "significantly higher". Excluding the effect of changes in average prices for lumber and OSB, the business is expected to post approximately $40 million less EBITDA than in second-quarter 2023. This is down from the “slight decline” guided last quarter, given higher lumber costs and lower lumber sales volumes due to wildfire-related production impacts at several Canadian mills and temporary downtime at its Longview mill related to a neighboring mill fire. Additionally, EWP raw material costs, primarily for OSB webstock, have been higher than earlier expected.
Our model predicts Wood Products segment revenues (which accounted for approximately 75% of second-quarter 2023 revenues) to decrease 9.4% year over year but increase 6.7% sequentially to $1,601.2 million in the quarter. Adjusted EBITDA is expected to decline 17.5% from a year ago but increase 20.7% sequentially to $325.8 million.
Weyerhaeuser now expects adjusted EBITDA in the Timberland segment to be $35 million sequentially lower versus its prior expectation of a $25 million decline due to lower-than-anticipated Western log sales volumes stemming from fewer export shipments to Japan than forecasted and wildfire-related harvest restrictions. Also, the company expects lower-than-anticipated lumber sales volume and higher costs as wildfire restrictions impacted its Canadian operations and a fire at a neighboring (Nippon Paper) mill led to curtailments at its Longview sawmill.
We expect the Timberland segment net sales (which accounted for 28.4% of second-quarter net sales) to drop 5.5% year over year and 4.3% sequentially to $542.4 million. Adjusted EBITDA is expected to decline 18.5% from a year ago and 20.4% sequentially to $136.9 million.
Meanwhile, in the Real Estate, Energy and Natural Resources segment, Weyerhaeuser expects adjusted EBITDA to be $20 million higher than the second quarter.
Our model predicts the Real Estate, Energy and Natural Resources segment (which accounted for 4% of second-quarter net sales) net sales to be $91.6 million, up 34.8% year over year and 14.5% sequentially. Adjusted EBITDA is expected to grow 47.9% from a year ago and 26.8% sequentially to $88.8 million.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Weyerhaeuser this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Currently, WY has an Earnings ESP of -1.68% and carries a Zacks Rank #3.
Stocks With Favorable Combination
Here are some other companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat on their respective quarters to be reported.
LPX’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, with the average being 95.8%. Earnings for the to-be-reported quarter are expected to decline 19.2% year over year.
Construction Partners, Inc. (ROAD - Free Report) has an Earnings ESP of +2.91% and sports a Zacks Rank #1.
ROAD’s earnings topped the consensus mark in three of the last four quarters, with the average being 10.6%. Earnings for the to-be-reported quarter are expected to rise 108% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +1.24% and sports a Zacks Rank #1.
DY’s earnings topped the consensus mark in all the last four quarters, the average being 147.4%. Earnings for the to-be-reported quarter are expected to increase 4.7% year over year.
Image: Bigstock
Factors Setting the Tone for Weyerhaeuser's (WY) Q3 Earnings
Weyerhaeuser Company (WY - Free Report) is slated to report third-quarter 2023 results on Oct 26, after the closing bell.
In the last reported quarter, the company’s earnings had surpassed the Zacks Consensus Estimate by 52.4%, but net sales missed the same by 1.5%. Quarterly adjusted earnings and net sales for the quarter, however, decreased 69.8% and 32.8%, respectively.
Weyerhaeuser’s earnings beat the consensus mark in all the last four quarters, with the average surprise being 40.8%.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has declined to 33 cents from 38 cents over the past 30 days. The estimated figure indicates a decrease of 21.4% from the year-ago level. The consensus mark for revenues is $2.12 billion, suggesting a 7.1% year-over-year decline.
Weyerhaeuser Company Price and EPS Surprise
Weyerhaeuser Company price-eps-surprise | Weyerhaeuser Company Quote
Factors to Note
Lower-than-anticipated Western log sales, lumber sales volume and EWP margins may have weighed on the company’s third-quarter performance despite operational excellence improvements and disciplined capital allocation moves of the company. Also, lower lumber prices are expected to have weighed on Weyerhaeuser’s third-quarter 2023 performance.
Meanwhile, transportation and resin shortages have been a headwind for the Wood business. Higher raw material costs for oriented strand board or OSB web stock, resin and veneer may have also been a pressing concern.
Nonetheless, solid demand from repair and remodeling activity, as well as from new residential construction activity, are expected to have aided quarterly results to some extent.
In late September 2023, WY updated its expectations for the third quarter. The company expects the Wood Products segment’s adjusted EBITDA to be moderately higher sequentially in the third quarter versus a prior expectation of "significantly higher". Excluding the effect of changes in average prices for lumber and OSB, the business is expected to post approximately $40 million less EBITDA than in second-quarter 2023. This is down from the “slight decline” guided last quarter, given higher lumber costs and lower lumber sales volumes due to wildfire-related production impacts at several Canadian mills and temporary downtime at its Longview mill related to a neighboring mill fire. Additionally, EWP raw material costs, primarily for OSB webstock, have been higher than earlier expected.
Our model predicts Wood Products segment revenues (which accounted for approximately 75% of second-quarter 2023 revenues) to decrease 9.4% year over year but increase 6.7% sequentially to $1,601.2 million in the quarter. Adjusted EBITDA is expected to decline 17.5% from a year ago but increase 20.7% sequentially to $325.8 million.
Weyerhaeuser now expects adjusted EBITDA in the Timberland segment to be $35 million sequentially lower versus its prior expectation of a $25 million decline due to lower-than-anticipated Western log sales volumes stemming from fewer export shipments to Japan than forecasted and wildfire-related harvest restrictions. Also, the company expects lower-than-anticipated lumber sales volume and higher costs as wildfire restrictions impacted its Canadian operations and a fire at a neighboring (Nippon Paper) mill led to curtailments at its Longview sawmill.
We expect the Timberland segment net sales (which accounted for 28.4% of second-quarter net sales) to drop 5.5% year over year and 4.3% sequentially to $542.4 million. Adjusted EBITDA is expected to decline 18.5% from a year ago and 20.4% sequentially to $136.9 million.
Meanwhile, in the Real Estate, Energy and Natural Resources segment, Weyerhaeuser expects adjusted EBITDA to be $20 million higher than the second quarter.
Our model predicts the Real Estate, Energy and Natural Resources segment (which accounted for 4% of second-quarter net sales) net sales to be $91.6 million, up 34.8% year over year and 14.5% sequentially. Adjusted EBITDA is expected to grow 47.9% from a year ago and 26.8% sequentially to $88.8 million.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Weyerhaeuser this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Currently, WY has an Earnings ESP of -1.68% and carries a Zacks Rank #3.
Stocks With Favorable Combination
Here are some other companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat on their respective quarters to be reported.
Louisiana-Pacific Corporation (LPX - Free Report) has an Earnings ESP of +2.07% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
LPX’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, with the average being 95.8%. Earnings for the to-be-reported quarter are expected to decline 19.2% year over year.
Construction Partners, Inc. (ROAD - Free Report) has an Earnings ESP of +2.91% and sports a Zacks Rank #1.
ROAD’s earnings topped the consensus mark in three of the last four quarters, with the average being 10.6%. Earnings for the to-be-reported quarter are expected to rise 108% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +1.24% and sports a Zacks Rank #1.
DY’s earnings topped the consensus mark in all the last four quarters, the average being 147.4%. Earnings for the to-be-reported quarter are expected to increase 4.7% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.