Weyerhaeuser Company WY is scheduled to report first-quarter 2016 results on May 6, before the market opens. The Zacks Consensus Estimate for the quarter is pegged at 20 cents.

The company delivered better-than-expected results in two of the four trailing quarters, while recording lower-than-expected results in one and in-line results in the other with an average beat of 7.50%.

Last quarter, Weyerhaeuser’s earnings of 24 cents per share matched the Zacks Consensus Estimate. Let us see how things are shaping up for the company prior to this announcement.

Factors to Affect Q1 Results

In the quarters ahead, the recovering U.S. housing market will likely boost business for Weyerhaeuser’s Timberlands and Wood Products segments. Housing starts are expected to be approximately 1.2 million in 2016. Also, the company’s ongoing cost-reduction initiatives will help it reduce controllable costs and improve earnings before interest, tax, depreciation and amortization contributions from various businesses. In addition, its focus on improving engineered lumber products and distribution businesses will provide tailwinds.

Further, Weyerhaeuser’s commitment on rewarding its shareholders with dividend payments and share buybacks will prove to be beneficial. Also, the company’s merger with Plum Creek Timber Co. Inc will enable it to offer better products and services to its customers.

However, near-term headwinds for Weyerhaeuser include stiff competition, adverse currency translation and geopolitical issues. The Cellulose Fibers business is expected to remain weak in the first quarter. Also, performance of the Timberlands segment will likely be in line with the preceding quarter.

Earnings Whispers

Our proven model does not conclusively show that Weyerhaeuser will likely beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Weyerhaeuser has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 20 cents.

Zacks Rank: Weyerhaeuser currently carries a Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are companies in the building products industry you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Comfort Systems USA Inc. FIX, with an Earnings ESP of +2.38% and a Zacks Rank #1.

Tile Shop Holdings, Inc. TTS, with an Earnings ESP of +7.69% and a Zacks Rank #1.

Beacon Roofing Supply, Inc. BECN, with an Earnings ESP of +19.05% and a Zacks Rank #2.

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COMFORT SYSTEMS (FIX): Free Stock Analysis Report
 
BEACON ROOFING (BECN): Free Stock Analysis Report
 
WEYERHAEUSER CO (WY): Free Stock Analysis Report
 
TILE SHOP HLDGS (TTS): Free Stock Analysis Report
 
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