Weyerhaeuser Co. (WY) reported its financial results for the third quarter of 2010. Adjusted net income in the quarter was $81 million, or 25 cents per share, compared with a net loss of $56 million, or 26 cents per share in the corresponding quarter of 2009. Earnings per share (EPS) surpassed the Zacks Consensus Estimate of 11 cents.
Earnings per share in the quarter excludes income tax adjustments of approximately $1.035 billion related to the reversal of deferred taxes as a result of Weyerhaeuser’s conversion to a real estate investment trust (REIT). Including the income tax adjustment, earnings per share was $3.50.
Revenue
Net sales were $1,664 million, reflecting a growth of 18.3% year over year based on stronger forest products and real estate revenues. Result was above the Zacks Consensus Estimate of $1,644 million.
In the third quarter, Timberland revenue increased 24.3% year over year to $240 million and accounted for 14.4% of the total revenue. Revenue from Wood Products was up 6.5% to $789 million and represented 37.6% of total revenue.
Revenue generated from Cellulose Fibers, roughly 31.4% of total revenue, increased 33.8% to $522 million, while Real Estate, roughly 12.6% of total revenue, rose 7.1% to $210 million. Finally, revenue from corporate and other sources, 4.0% of total revenue, was $66 million, up 65% year over year.
Total costs and expenses, as a percentage of revenue was roughly 90.0% compared with 91.3% in the third quarter of 2009. Operating income improved year over year from $123 million to $167 million in the quarter, while operating margins were roughly 10.0% in the third quarter of 2010.
Balance Sheet
Exiting the third quarter, Weyerhaeuser had cash and cash equivalents (Forest Products and Real Estate) of approximately $1,368 million compared with $1,846 million in the second quarter of 2010. Long-term debt was approximately $5,100 versus $5,124 million in the previous quarter.
Cash flow from operating activities was approximately $118 million, down from $243 million in the previous quarter and above $34 million in the year-ago comparable quarter. Capital expenditure increased 10.3% sequentially to $43 million but declined 14% year over year.
Weyerhaeuser is one of the leading U.S. forest product companies, primarily engaged in growing and harvesting timber; manufacture, distribution, and sale of forest products; and real estate development and construction.
We are currently maintaining a Neutral recommendation on Weyerhaeuser, which is supported by Zacks # 3 Rank (Hold).
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