Market News

Weyerhaeuser Buys 80,800 Acres of Timberland; Street Says Buy

One of the largest private owners of timberlands and manufacturers of wood products, Weyerhaeuser Company (WY), has agreed to purchase 80,800 acres of timberland in North and South Carolina for a consideration of about $265 million.

WY is acquiring the timberlands from a fund managed by Campbell Global. The highly productive timberlands are located in coastal markets and are expected to provide immediate synergies with WY’s present timber and mill operations. The transaction takes WY’s timberlands in Carolinas to over 900,000 acres and is expected to close in the second quarter of 2022.

Management Weighs In

The President and Chief Executive Officer of WY, Devin Stockfish, commented, “This transaction is a great example of our ongoing efforts to enhance our portfolio with high-quality, well-managed timberlands that generate solid returns for our shareholders.”

He added, “These Carolina timberlands are strategically located, well-integrated with our existing operations, and offer very attractive timberland attributes, and they will provide strong cash flows for our Southern Timberlands business.”

Notably, the acquisition provides a well-stocked inventory with a mature age class and an average harvest of 6.5 tons per acre over the first ten years. Additionally, the average adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to be $160 per acre from timber operations during this period.

Analyst Take

D.A. Davidson analyst Kurt Yinger has reiterated a Hold rating on the stock while decreasing the price target to $30 from $40.

Overall, the Street has a Strong Buy Consensus rating on WY based on four Buys and a Hold. The average Weyerhaeuser price target of $42.60 implies a potential upside of 6.77%. That’s after a 5% gain in the share price over the past five days.

Closing Note

WY owns or controls about 11 million acres of timberland in the U.S. and manages additional assets in Canada. This prime property with strong productivity offers attractive long-term timber returns for the company. Lumber prices have seen a correction recently amidst the present global macroeconomic uncertainty and inflation concerns. However, WY may benefit from the prime inventory addition when prices rebound.

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