March 23, 2020
(Courtesy: JAX Daily Record)
Last year, Rayonier Inc. was closely watching trade negotiations to see how they might impact the company’s sales to China.
This year, the timber and real estate company has a new concern about China: the coronavirus.
“The coronavirus outbreak has significantly curtailed manufacturing and construction activity in the region,” said Chief Financial Officer Mark McHugh during Rayonier’s quarterly conference call last week, according to a transcript posted by the company.
In addition to its timber properties in the Southeast U.S., Rayonier operates timberlands in the Northwest and in New Zealand, which do business with China.
Rayonier last month announced a deal to expand its timber properties in the Northwest by acquiring Poulsbo, Washington-based Pope Resources.
“Overall, we remain confident in the long-term potential of the China export market, and we are cautiously optimistic that the U.S.-China Phase I trade deal will lead to a gradual improvement in market conditions,” McHugh said.
However, the impact of the coronavirus and competition from Europe is creating near-term challenges in timber markets, he said.
Meanwhile, Rayonier said profits from its Southeastern timber operations were strong in the fourth quarter.
That lifted fourth-quarter earnings to 12 cents a share, up from 2 cents in the fourth quarter of 2018. The earnings also beat the consensus forecast of analysts by 2 cents, according to Zacks Investment Research.
Rayonier said results from its real estate division were less than expected, due to the timing of sale closings.
However, McHugh said momentum is strong at the company’s Wildlight mixed-use development in Nassau County.
“Most of the major infrastructure is now in place and our next phase of 122 residential lots is scheduled to be substantially completed by the end of Q1,” he said.
Rayonier moved its headquarters from Jacksonville to Wildlight in 2017.
McHugh projected 2020 earnings, excluding the impact from the Pope acquisition, of 36 cents to 44 cents a share, down from 46 cents in 2019.
Rayonier’s stock fell by $2.34 last Thursday and Friday to $28.22 after the earnings report.
The decline prompted Raymond James analyst Collin Mings to reiterate his “outperform” rating on the stock Monday.
“Overall, we believe another earnings season pullback in Rayonier shares has once again translated into a favorable opportunity for investors,” Mings said in a research note.
“We witnessed Rayonier shares react unfavorably in response to earnings/guidance multiple times in 2019 and subsequently rebound as investors fully digested the results/outlook,” he said.
D.A. Davidson analyst Steven Chercover also maintained a “buy” rating.
“With the accretive Pope deal on the way, a solid housing backdrop, and a standalone Rayonier outlook pointing to a nice pickup from 2019, we think there remains attractive upside potential for shares,” Chercover said in his report.