For immediate release
Chicago, IL – February 10, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: PotlatchDeltic Corp. PCH, Weyerhaeuser Co. WY, Boise Cascade Co. BCC, Louisiana-Pacific Corp. LPX and Rayonier Inc. RYN.
Here are highlights from Wednesday’s analyst blog:
Why Wood Stocks Are Good Game Right Now
Some commentators have started talking about a slowdown in the housing market, as we seem to be looking at multiple rate hikes this year that will translate into higher mortgage rates, making real estate purchases all the more difficult. While there will no doubt be a noticeable impact from rate hikes, that’s not the only problem in the housing market.
A far more important consideration is the lack of inventory, especially in the affordable category and a push on the demand side from a demographic standpoint that outweighs the issue of pricing. Additionally, while we appear to be heading for multiple rate hikes, the tendency to enter ahead of the next hike will also boost home buyers throughout the year.
Indeed, Freddie Mac recently released his expectations for the year. He expects mortgage rates to rise from around 3% in 2021 to 3.6% in 2022 and 3.9% in 2023. But demand is so strong that it won’t really hurt home sales, which will remain at last year’s level of 6.9 million and rise to 7.1 million next year. Purchase mortgages will grow from $1.9 trillion in 2021 to $2.1 trillion this year and $2.2 trillion in 2023, with refinancing activity understandably slower.
With demand where it is, homebuilders are in a good position to take advantage of the situation. But there’s another group that’s just as likely to share the spoils. And these are the timber/timber/timber producers.
That’s because lumber prices started to rise again in the final months of 2021, as DIY buyers returned to take advantage of price moderation. And then other factors started to add fuel:
First of all, in November itself, the Department of Commerce more than doubled the tariffs imposed on Canadian lumber producers to 17.99%. Since Canada accounts for a quarter of the country’s wood supply, the higher tariff was a major factor in the price increase.
Second, environmental issues, including storms and floods, have plagued Canadian suppliers, and pine beetle infestations have made matters worse.
Third, transportation and logistics issues in the United States have affected the industry, just like other industries.
Although the tariff issue does not benefit timber producers, other factors contribute to shortages that allow them to raise prices.
Industry watchers don’t expect a return to the $1,500+ per thousand board feet rate we saw last year. But it’s worth noting that prices are already over $1,000 per thousand board feet.
Most lumber producers are seeing increased orders, with builders ordering ahead for fear of continued price escalation and supply limitations that would hurt their ability to meet strong demand for homes . It also improves the visibility of lumber producers.
An offsetting factor is the addition of capacity in the Southern states which is expected to increase supply, leading to some price moderation over the course of the year. In this regard, companies that control/own both timber and timber are better placed to benefit.
Considering the above factors, timber companies like Potlatch Deltic Corp., Weyerhaeuser Co., Boise Cascade Co., Louisiana-Pacific Corp. and Rayonnier Inc. see their estimates increase. The building products – wood industry to which they belong is in the top 18% of more than 250 industries ranked by Zacks.
PotlatchDeltic and Weyerhaeuser carry a Zacks rank #1 (strong buy) while Boise Cascade, Louisiana-Pacific and Rayonier carry a Zacks rank #2 (buy). All are seeing their estimates rise as the industry enters a phase of unexpectedly strong demand leading to continued pricing power. Here is a brief description of each:
Potlatch Deltic Corp.
PotlatchDeltic is a leading real estate investment trust (REIT) that owns 1.8 million acres of forest land in Alabama, Arkansas, Idaho, Louisiana, Minnesota and Mississippi. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business, and a rural timberland sales program.
One of the largest timberland owners in the world, Weyerhaeuser owns or controls 10.7 million acres in the United States and Canada and manages an additional 14.1 million acres under long-term leases in Canada. It also has 35 wood production facilities, making it one of the largest producers with customers in the residential, industrial, light commercial, and repair and renovation markets.
Boise Cascade Co.
Boise Cascade is one of the largest producers of engineered wood products (EWP) and plywood in North America and a major US wholesale distributor of building products.
Louisiana-Pacific is one of the largest producers of wood products like engineered wood siding, oriented strand board (OSB) and EWP for residential construction, retail, wholesale and industrial customers.
Rayonier is a leading forestland REIT with assets located in some of the most productive softwood lumber producing regions in the United States and New Zealand. As of December 31, 2020, Rayonier owned or leased under long-term agreements approximately 2.7 million acres of forest land located in the southern United States, the United States Pacific Northwest and New -Zealand. He is also a managing member of a timber private equity fund business with three funds comprising approximately 141,000 acres. Rayonier’s ownership in the timber fund business amounts to approximately 17,000 acres.
5 shares ready to double
Each was handpicked by a Zacks expert as the #1 preferred stock to earn +100% or more in 2021. Previous recommendations have skyrocketed +143.0%, +175.9%, + 498.3% and +673.0%.
Most of the stocks in this report fly under the radar on Wall Street, which provides a great opportunity to get in on the ground floor.
Today, check out these 5 potential home runs >>
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.
7 best stocks for the next 30 days
Just Released: Experts distill 7 elite stocks from the current Zacks No. 1 Ranking 220 Strong Buys list. They consider these tickers “most likely for early price increases.”
Since 1988, the full list has beaten the market more than 2 times with an average gain of +25.4% per year. So be sure to give these handpicked 7 your immediate attention.
Discover them now >>
Click to get this free report
Weyerhaeuser Company (WY): Free Stock Analysis Report
LouisianaPacific Corporation (LPX): Free Stock Analysis Report
Rayonier Inc. (RYN): Free Stock Analysis Report
Potlatch Corporation (PCH): Free Stock Analysis Report
Boise Cascade, LLC (BCC): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.