Plum Creek Timber Company Inc.’s PCL third-quarter 2015 earnings came in at 58 cents per share, comfortably beating the Zacks Consensus Estimate of 51 cents and improving from the prior-year quarter figure 34 cents.

Total revenue for the quarter was $414 million, up 10.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $434 million.
 

Segment Performance

Operating income at the company’s Northern Resources segment declined to $6 million from $13 million recorded in the year-ago quarter. Overall harvest volumes were down 16% year over year to about 167,000 tons. Fire restrictions limited harvesting activity to some extent in the western states, impacting the segment’s sawlog harvest.

The Southern Resources segment posted operating income of $33 million, down by $2 million from the prior-year quarter. The harvest mix shifted toward a higher component of pulpwood though harvest volumes were mostly unchanged year over year.

Operating income at the Real Estate segment was $84 million for third-quarter 2015, much higher than $34 million reported a year ago. Results reflect the sale of around 98,000 acres of non-strategic timberlands in Florida for $1,230 per acre, 3,700 acres of recreation lands for $2,015 per acre and 1,060 acres of small non-strategic timberlands, mainly in New England, for $650 per acre.

Operating income at the Manufacturing segment came in at $8 million, down from $16 million in the year-ago period, reflecting weak lumber product-line results and a pre-tax insurance recovery gain in 2014.

Operating income for the Energy and Natural Resource segment was $5 million, down $1 million year over year, reflecting reduced royalty income from coal and natural gas assets.

Liquidity

Plum Creek ended third-quarter 2015 with $81 million in cash and cash equivalents, down from $83 million at the end of the prior quarter. Total long-term debt was nearly $1.98 billion, flat on a sequential basis.

Outlook

Plum Creek expects overall harvest volumes in the range of 18.5–19 million tons for the year, lower than the prior projection, reflecting a decrease in the Northern and Southern Resources segments.

The company projects Real Estate segment sales to be around $35–$45 million in the fourth quarter, while Manufacturing, and Energy and Natural Resources results are expected to be similar to third-quarter levels.

Finally, Plum Creek projects its 2015 net income in the range of $1.06–$1.11 per share. The Zacks Consensus Estimate of $1.09 lies within the range.

For the fourth quarter, the company estimates net income in the range of 13–18 cents per share. The Zacks Consensus Estimate is currently pegged at 22 cents.

Share Repurchase

During third-quarter 2015, Plum Creek bought back shares worth around $50 million at an average price of $39.20 a share. As of Sep 30, 2015, the company had $200 million remaining under its repurchase authorization.  

Our Viewpoint

We are encouraged by Plum Creek’s earnings beat this quarter. However, lower-than-expected revenues and a decline in harvest volumes keep us concerned.

Plum Creek Currently has a Zacks Rank #3 (Hold).

Other REIT stocks that are scheduled to release third-quarter 2015 results this week include Public Storage PSA, Host Hotels & Resorts, Inc. HST and Essex Property Trust Inc. ESS.

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