A month has gone by since the last earnings report for Weyerhaeuser (WY). Shares have lost about 13.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Weyerhaeuser due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Weyerhaeuser’s Q4 Earnings Miss, Sales Beat Estimates

Weyerhaeuser Company reported mixed fourth-quarter 2019 results, with earnings missing the Zacks Consensus Estimate, while net sales beating the same.

The company reported adjusted earnings of 3 cents per share, which missed the consensus mark of 7 cents by 57.1% and declined 70% from the year-ago figure of 10 cents.

Net sales during the quarter amounted to $1,548 million, beating the consensus mark of $1,524 million by 1.6%. However, the reported figure fell 5.4% from $1,636 million reported in the prior-year quarter. Its two major segments reported significantly lower net sales on a year-over-year basis.

Segments Details

The company currently operates through three business segments —Timberlands; Real Estate, Energy and Natural Resources; and Wood Products.

Timberlands’ net sales (including inter-segment sales of $122 million) during the quarter came in at $510 million, down 11.5% from the year-ago figure of $576 million. Lower average log sales realizations and fee harvest volumes in the South, as well as seasonally lower Western road and forestry spending caused the decline.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $158 million, down 16% from $188 million in the year-ago quarter.

Net sales in Real Estate, Energy and Natural Resources amounted to $46 million, down 54.9% from $102 million reported in the prior-year quarter. Adjusted EBITDA also fell 58.9% to $37 million from $90 million in the year-ago quarter. Earnings and adjusted EBITDA registered a fall due to fewer real estate sales, and lower construction materials and energy royalties in the Energy & Natural Resources business.

Sales in the Wood Products segment totaled $1,115 million, up 2.6% from $1,087 million in the prior-year quarter. Adjusted EBITDA came in at $110 million, up 66.7% from the year-ago figure of $66 million.

Operating Highlights

During the quarter, gross profit plunged more than 15% to $247 million from $291 million in the prior-year quarter. Adjusted EBITDA was $260 million in the quarter, down nearly 25% from $346 million in the year-ago quarter.

Financial Highlights

As of Dec 31, 2019, Weyerhaeuser had cash and cash equivalents of $139 million, down from $334 million at 2018-end. Long-term debt was $6,147 million versus $5,419 million at the end of 2018.

Net cash from operations was $966 million at the end of 2019, down from $1,112 million at 2018-end.

2019 Highlights

In 2019, total revenues were $6,554 million, down 12.3% year over year. Adjusted earnings were reported at 39 cents, down from the year-ago figure of $1.18 per share. Adjusted EBITDA was reported at $1,276 in 2019, down 37.2% from $2,032 in 2018. The company’s performance was significant impacted by a sluggish housing market, global trade uncertainty and challenges in commodity prices.

Q1 2020 Outlook

For the first quarter, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment. Geographically, in the West, the company expects higher domestic and export log sales volumes, moderate average domestic log sales realizations and lower road spending. In the South, the company anticipates lower fee harvest volumes and comparable average log sales realizations.

In the Real Estate, Energy and Natural Resources segment, Weyerhaeuser anticipates significantly higher earnings and adjusted EBITDA than fourth-quarter levels. For 2020, the segment’s adjusted EBITDA is estimated to be $255 million, including the effect of fewer available real estate acres post divestitures of Montana and Michigan timberlands.

In the Wood Products segment, the company predicts earnings and adjusted EBITDA (before any improvement in average sales realizations) to be slightly higher than fourth-quarter levels. Weyerhaeuser expects seasonally improved operating rates and manufacturing costs for engineered wood products, along with slightly higher sales volumes for lumber and oriented strand board.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -25.93% due to these changes.

VGM Scores

At this time, Weyerhaeuser has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It’s no surprise Weyerhaeuser has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.