The US housing market continues to strengthen this year thanks mainly to improvement in the labor market and still low interest rates. This Zacks Rank #1 (Strong Buy) timber REIT is well positioned to capitalize on the housing market recovery.
About the Company
Structured as a REIT, Potlatch (PCH – Free Report) owns approximately 1.4 million acres of forestland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. The company also operates five manufacturing facilities that produce lumber and panel products. They are among the top 10 lumber manufacturers in the US.
Additionally, the company conducts a real estate sales and development business through its subsidiary.
Better-than-expected Results
The company reported much better-than-expected Q4 results. Their adjusted income of 35 cents per share was ahead of the Zacks Consensus Estimate of 30 cents.
“Strong performance by each of our three businesses and improved lumber prices resulted in solid earnings this year,” said the CEO.
Rising Estimates
Zacks Consensus Estimates for the current and next year have increased to $1.65 and $1.83 respectively, from $1.55 and $1.82, before the results. The following chart shows earnings and price momentum for PCH:
Potlatch Corporation Price and Consensus
Potlatch Corporation Price and Consensus | Potlatch Corporation Quote
Returning Capital to Shareholders
The company has been returning a lot of cash to shareholders via dividends and buybacks. The dividend yield is 3.15% as of now. They also have about $50 million remaining on share buyback authorization.
Lumber Demand and Price Surging
Per WSJ, lumber prices surged to a 12-year high last week on expectations that the US will soon impose a steep import duty on Canadian lumber. A ruling on possible tariff is expected later this month.
The trade dispute between the US and Canada over softwood lumber imports has been going on for decades. US lumber producers allege that the Canadian government subsidizes its lumber producers thereby giving them an unfair advantage in the US lumber market.
