The Rising Influence of Rising Affluence

[DewDiligence]

This WY piece from Barron’s came out on 10/31/15—before the PCL merger announcement:

http://www.barrons.com/articles/weyerhaeusers-earnings-poised-to-rebound-1446267605

Weyerhaeuser’s Earnings Poised to Rebound

In the two years since Doyle Simons took the helm of Weyerhaeuser, he has reshaped the timber giant by slashing costs, shedding one nonstrategic unit, and revitalizing two others, and he’s done it in a challenging operating environment.

…Under Simons, Weyerhaeuser has been more shareholder friendly. In August, it unveiled a 7% hike in its quarterly dividend to 31 cents a share, the fifth increase in four years; since 2011, the payout has risen by 107%, with most of that occurring on Simons’ watch. He also set a new $500 million share repurchase plan to succeed a recently completed $700 million one initiated in 2014. [This, of course, excludes the new $2.5B buyback announced in connection with the PCL merger.]

…Ryan Dobratz, a portfolio manager at Third Avenue Management, with $8 billion in total assets, calls CEO Simons “our internal activist” based on his efforts to improve performance. Third Avenue is betting Weyerhaeuser’s earnings power will be “significantly greater” in two to three years as the housing market reaches a sweet spot and Simons whittles away at the number of outstanding shares.

…Weyerhaeuser shares are a steal. They trade at a 30% discount to net asset value, using a roughly $42-a-share valuation for its businesses. While it boasts the biggest market value–$15 billion–of the publicly traded timber REITs, it’s also the cheapest by key measures.

…As the company further streamlines and focuses more on its core timber holdings, which produce most of its operating income, it is expected to shed more of its wood products businesses over time.

The merger with PCL is a giant step towardn emphasizing WY’s timberlands business and de-emphasizing the manufacturing segment.