Plum Creek Timber Co. Inc. (PCL), a real estate investment trust (REIT) owning and managing timberlands in the U.S., reported fiscal 2010 first quarter recurring earnings of 47 cents per share that exceeded the Zacks Consensus Estimate by 9 cents. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
During first quarter 2010, Plum Creek reported revenues of $317 million vis-à-vis $470 million in the year-ago quarter. Although revenues and earnings declined year-over-year, the company reported better-than-expected performances across all segments, with stabilization in most timber markets and modest log price improvements. In addition, Plum Creek benefited from its manufacturing downsizing and cost management efforts.
(Read our full coverage on this earnings report: Plum Creek Tops Zacks Estimates)
Earnings Estimate Revisions – Overview
Estimates have moved up for Plum Creek since the earnings release, meaning that analysts were optimistic about the long-term performance of the company. Let’s dig into the earnings estimate details.
Agreement of Analysts
In the last seven days, fiscal 2011 estimates have been increased by 1 analyst. Analysts, in general, are in consensus about the future outlook for Plum Creek’s earnings, as is visible below. Nine analysts have raised their earnings estimates for 2010, while none have lowered them. For fiscal 2011, 6 analysts have raised their earnings estimates and none have revised them lower. This is a positive showing.
Magnitude of Estimate Revisions
Earnings estimates have risen 7 cents for fiscal 2010 from $1.41 to $1.48 since the earnings announcement. For fiscal 2011, earnings estimates have moved up 8 cents from $1.53 to $1.61. This is encouraging news for the company.
Plum Creek’s Strong Outperform Rating
The long-term estimate picture of Plum Creek is positive. Plum Creek is the largest publicly-held timber REIT, with a diversified timber and land base that enables it to benefit from large economies of scale.
In addition, the upsurge in demographic trends driving housing markets and demand for real estate properties across the country provides a strong economic backdrop for the company to demonstrate solid financial performance in the future. However, cyclical nature of the forest products industry and stiff competition from regional as well as national players in the market may weigh on the company’s top and bottom-lines.
Currently, Plum Creek’s shares are maintaining a Zacks #1 Rank, which translates to a short-term Buy recommendation. Our long-term recommendation for the stock also remains at the zenith at Outperform as we anticipate the stock to perform well above the broader market.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “PCL”
Zacks Investment Research
