Weyerhaeuser stumbling as timber market weakens

Associated Press

SEATTLE — Weyerhaeuser Co. on Thursday lowered its estimates for the fourth quarter, warning it will barely break even due to a weak timber market and slow global economy.

Analysts had been predicting the company would earn 15 cents a share in the quarter that ends Dec. 31. Weyerhaeuser did not give specific guidance on earnings expectations, but Richard Taggart, vice president of finance, conceded the company had expected to do better.

Taggart said the company had been hurt by a drop in orders in most of its product lines since Sept. 11, a sharper-than-expected decrease in lumber prices, and heavier duties for importing wood from Canada.

The Federal Way-based company is expected to report fourth-quarter earnings Jan. 23.

"The fact there’s some downward pressure is not surprising," said analyst Lise Shonfield of J.P. Morgan, citing low wood products prices.

Indeed, Wall Street seemed unbothered the news. Shares in Weyerhaeuser were up 24 cents, to $53.84, in afternoon trading on the New York Stock Exchange.

Analyst Joshua Zaret with ABN Amro said investors were forgiving because they believe this is the low point of the industry’s slump and are confident of a recovery as early as the second quarter of next year.

"We’re talking about earnings here. Yeah, they’re lousy. They’ve been lousy for a year," he said. "But everyone believes that we’re close to the bottom."

Zaret said analysts are also confident that Weyerhaeuser, along with the industry as a whole, is well-positioned to take advantage of the rebound.

The news comes days after rival Willamette Industries for the first time agreed to explore Weyerhaeuser’s hostile takeover bid. Willamette, based in Portland, Ore., said it would consider the bid after Weyerhaeuser increased its offer to $55 a share.

Shonfield said she did not expect Weyerhaeuser’s weak performance to hurt its efforts to take over Willamette. If anything, she said, Weyerhaeuser’s weak performance would only strengthen its resolve to take over Willamette as a buffer in the current economic climate.

Shares in Willamette were down 18 cents to $51.90, also in afternoon trading on the NYSE.