Weyehaeuser Beats Lower Earnings, But Value Unlocking Plan Remains Elusive (WY)

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Weyerhaeuser (NYSE:WY) has posted earnings that were mixed on the surface, but after you back out one-time charges the company posted $0.48 EPS on revenues of $4.3 Billion.  First Call estimates were $0.39 EPS and $4.24 Billion in revenues. Unfortunately these earnings numbers are convoluted with various EPS charges of $0.14, $0.12, $0.12, $0.02; and a net gain to EPS of $0.07.

The company gave some color on each area of operations, and this was mixed.  Higher seasonal costs and lower sales of non-strategic timberlands adversely affected earnings; Lumber, plywood and oriented strand board prices increased slightly, but market conditions remained difficult; Cellulose Fiber prices continued to increase; Containerboard Packaging and Recycling saw a normal seasonal upswing in packaging shipments occurred and average price realizations for packaging increased due to product mix, but fiber costs remain high; Real Estate and Related Assets: market conditions remain challenging and margins continue to decline, hard to imagine that would be any different right now.

Unfortunately, any solid restructuring plan or unlocking value method is not specific and is still quite vague.  Steven R. Rogel, chairman, president & CEO: "In response to continued challenging market conditions, we managed production and costs throughout the second quarter.  Our focus remains on the strategic initiatives we’ve been implementing to create more value for shareholders. In the coming quarter, we will look for ways to further reduce costs and improve performance as we face challenges produced by the continuing sluggish housing market. Meeting these challenges will require tough decisions and the focus of every employee."

Shares are up 1% after results look ahead of expectations.  But without any formal shareholder value unlocking plan, there seems no compelling argument that new shareholders needs to rush in immediately.  It would seem the recent credit crunch and slowdown in housing and development are keeping a solid break-up, recapitalization, or reclassification at bay.  The comapny has so much timberland that it should still consider applying to become the 51st state. 

Jon C. Ogg
August 3, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.