Weyerhaeuser reported better-than-expected results for the first quarter of 2018 with earnings and sales surpassing estimates by 9.1 percent and 4.2 percent, respectively.
Earnings from continuing operations before special items in the reported quarter were 36 cents per share, surpassing the Zacks Consensus Estimate of 33 cents. Also, the bottom line surged 63.6 percent from the year-ago tally of 22 cents.
Solid Wood Products and Timberlands Drive Top Line
In the quarter under review, Weyerhaeuser’s net sales were $1,865 million, up 10.2 percent year over year. Also, the top line surpassed the Zacks Consensus Estimate of $1.79 billion.
The company operates through three business segments, results of which are given below:
Timberlands: The segment’s revenues (excluding intersegment sales) in the first quarter were $505 million, up 3.9 percent year over year. It accounted for 27.1 percent of net sales.
Real Estate, Energy and Natural Resources: The segment’s revenues, accounting for 2.7 percent of net sales, were $51 million. The figure decreased 3.8 percent from the year-ago tally.
Wood Products: The segment generated revenues (excluding intersegment sales) of $1,309 million, accounting for 70.2 percent of net sales. Compared with the year-ago quarter, the figure was up 13.4 percent.
Margin Profile Improves
In the reported quarter, Weyerhaeuser’s cost of sales grew 6 percent year over year to $1,348 million. It represented 72.3 percent of net sales versus 75.1 percent in the year-ago quarter. Gross margin expanded 280 basis points to 27.7 percent.
Selling expenses flared up 4.5 percent year over year to $23 million and came in at 1.2 percent of net sales. General and administrative expenses, at 4.2 percent of net sales, decreased 10.3percent year over year to $78 million. Research and development expenses were $2 million, half of the year-ago tally.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $544 million in the quarter, increasing 19.8 percent year over year. Adjusted EBITDA margin was 29.2 percent versus 26.8 percent in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, Weyerhaeuser had cash and cash equivalents of $598 million, down from $824 million at the end of the preceding quarter. Long-term debt remained flat at $5,928 million.
In the reported quarter, the company generated net cash of $136 million from operating activities, reflecting year-over-year growth of 288.6 percent. Capital spending of $61 million grew 17.3 percent year over year. During the same period, the company paid dividends worth $242 million.
Outlook
In the quarters ahead, Weyerhaeuser anticipates leveraging benefits from strengthening housing-market conditions (as evident from rising housing starts) in the United States.
For second-quarter 2018, Weyerhaeuser anticipates sequentially lower earnings and adjusted EBITDA from the Timberland segment. Results in the West will gain from a rise in log sales realization while suffering from higher road and forestry costs, as well as a rise in unit-logging costs. In the South, log sales realizations are predicted to be flat quarter over quarter. On a year-over-year basis, the segment’s earnings and adjusted EBITDA are anticipated to rise substantially.