With strong recovery in housing demand following the Great Recession, Plum Creek Timber Company Inc. (PCL) enjoyed solid demand for its products. But as home price appreciation took a back seat and demand for new housing tempered, the company was left to face the music. Coupled with this, issues regarding hike in interest rate anticipations have added to the woes.

Therefore, despite Plum Creek’s second-quarter earnings coming in at 31 cents per share, a penny above the Zacks Consensus Estimate and 3 cents higher than the prior-year quarter figure, a muted outlook disappointed us.

The company lowered its full-year 2014 outlook to a range of $1.05 – $1.25 per share from a previous projection of $1.30 – $1.50. This was due to lower harvest volumes, and anticipated slower growth in log price as well as composition of real estate deals for the rest of the year.

Plum Creek’s Southern Timberland buyout will favor its long-term growth. However, we believe that amid projections of slower growth in residential construction activities along with a modest recovery pace of timber markets in 2014, the shares would shy away from making any turnaround. Furthermore, the cyclical nature of the business, stiff competition and strict environmental policies remain causes of concern.

Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate declined 19.4% to $1.12 per share for 2014; while for 2015, it fell 9.8% to $1.47 per share. The stock currently carries a Zacks Rank #4 (Sell).

To gain a deeper insight into Plum Creek, you can refer to our updated research report issued on Aug 25, 2014.

Stocks That Warrant a Look

Investors interested in the REIT industry may consider other stocks like Avalonbay Communities Inc. (AVB), Apartment Investment and Management Company (AIV) and American Campus Communities, Inc. (ACC). All these stocks hold a Zacks Rank #2 (Buy).

Read the Full Research Report on PCL
Read the Full Research Report on AIV
Read the Full Research Report on AVB
Read the Full Research Report on ACC


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