Weyerhaeuser Earnings On Deck (WY, IP)

Weyerhaeuser Co. (NYSE:WY) has been hit exceptionally hard in this last market slide.  The paper conglomerate reports earnings Friday, and First Call estimates are looking for $0.39 EPS and $4.24 Billion in revenues.  If this gives guidance, the estimates for next quarter are $0.59 EPS & $4.27 Billion revenues and the Fiscal December-2007 estimates are $1.85 EPS & $16.8 Billion revenues.

Weyehaeuser is a stock on the verge of being in trouble if you ask a technician.  Shares have done much worse than the broad market in this last slide.  The reason is fairly simple: as liquidity and credit crunches have cropped up, Weyerhaeuser is getting hit in the face, in the ribs, and then having its eyes poked.  The company has lots of borrowing, has been considering a full-blown reorganization, and is now ‘possibly’ considered out of reach from private equity firms that are willing to or even can go borrow the vast sums to buy up timberland.  The markets might not also be that excited about trying to absorb its units, and if you have been watching the financial sector of late you will wonder if its land and community development operations have a negative value or a positive value.

On average, analysts are looking for only an $85.00-ish price target.  It is also easy to find upgrades and downgrades to the point you don’t know which or even want to know which report to trust.  Options traders appear to be braced for a move of up to $2.00 in either direction, but this one is harder to read and recent market conditions dictate a broader range now.  For Weyerhaeuser shareholders’ sake, let’s hope this one isn’t a mirror image of the post-earnings trading doesn’t mirror the International Paper (NYSE:IP) earnings. 

There is a lot of company here, particularly with all the units and a $15.5 Billion market cap.  If the company cannot restructure into a REIT, cannot break itself up, cannot further unlock value, OR cannot get its earnings expectations up, then it is going to be a cold winter day in the forest…..even if it is August.  As a last ditch effort, Weyerhaeuser owns so much acreage in the U.S.that it could apply to become the 51st state or could become its ownCanadian Province.  Friday is much more than an important day forWeyerhaeuser.

Jon C. Ogg
August 2, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.