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Weyerhaeuser Co. (NYSE: WY) reported a -29% decline in profits this morning. The company’s EPS came in at $0.02, compared with estimates of $0.19. Weyerhaeuser also missed on revenue, posting a number of $1.61 billion compared to estimates of $1.76 billion. Excluding items, the company’s EPS came in at $0.06 on revenue of $1.77 billion.

The company is selling its hardwoods and shipping lines businesses as it tries to deal with continuing problems with demand for lumber in the US housing market. And while Weyerhauser is shedding assets, other companies in the forest products industry are trying to acquire some. The most noticeable is International Paper Co. (NYSE: IP), which has taken an already rejected offer of $3.3 billion for Temple-Inland Inc. (NYSE: TIN) directly to Temple-Inland shareholders. Rock-Tenn Co. (NYSE: RKT) recently completed its acquisition of Smurfit-Stone Container Corp. and Boise Inc. (NYSE: BZ) has also picked up another packaging firm.

In a recent report, Standard & Poor’s showed that strong balance sheets and attractive financing terms will increase M&A over the next several quarters in the forest products industry in North America.  S&P believes that all of the action will occur in the paperboard and packing sectors, but that consolidation in the wood products sector is unlikely due to the weak recovery in the housing market.

That sounds about right. Weyerhaeuser isn’t the only lumber company that’s having earnings troubles. Lumber Liquidators Holdings Inc. (NYSE: LL) recently cut its forecast and the stock got pounded. Weyerhaeuser, Plum Creek Timber Co. (NYSE: PCL), and Rayonier Inc. (NYSE: RYN) are all trading below 52-week highs. Pope Resources LP (NASDAQ: POPE) has posted a share price gain of around 80% in the past twelve months, but its market cap is still only about $205 million, far smaller than any of the others.

Rayonier missed estimates yesterday and Plum Creek missed estimates earlier this week.

S&P suggests that “[a]cquisitions that result in further industry consolidation could potentially improve our business risk assessments” in the forest products sector. But with the possible exception of Pope, with its low market cap, it doesn’t appear that any large-scale deals are on tap for the lumber business.

Weyerhaeuser shares are trading up fractionally just before noon today, at $20.06, within a 52-week range of $15.06-$25.33. The Guggenheim Timber ETF (NYSE: CUT) is trading down fractionally, at $19.62, within a 52-week range of $17.26-$23.56.

Paul Ausick