On Mar 31, 2015, we issued an updated research report on Plum Creek Timber Co. Inc. PCL. Despite a geographically diversified private timberland portfolio, this firm’s growth prospect in the lumber and wood production industry will likely be hurt by sluggish growth in the residential construction market. In addition, increasingly stringent environmental norms as well as intensified competition from substitute products pose challenges before the company.
Plum Creek expects the residential construction market to remain slow in 2015 as well. The company anticipates housing starts to climb to just 1.1 million in 2015. This slow growth rate will lead to moderate lumber production and subdued demand for sawlog in South.
Further, Plum Creek has to compete with national and local players regarding a number of factors, including quality and price. Also, intensified competition from substitute products such as non-wood and engineering wood products, adds to its woes. At the same time, the company has to abide by all the state laws and regulations and incur significant expenditure to minimize adverse effects on environment, failing which it could face severe penalties.
Nevertheless, the company’s geographically diversified private timberland portfolio, higher demand for lumber and southern sawlog, and a healthy balance sheet bode well for the future.
Over the past 30 days, the Zacks Consensus Estimate remained stable at $1.18 per share for 2015, and $1.49 per share for 2016.
Plum Creek currently carries a Zacks Rank #4 (Sell).
Investors interested in the REIT industry may consider stocks like Silver Bay Realty Trust Corp. SBY, Equity Residential EQR and Ventas, Inc. VTR. While Silver Bay Realty Trust sports a Zacks Rank #1 (Strong Buy), both Equity Residential and Ventas hold a Zacks Rank #2 (Buy).
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