Rayonier (RYN) Down 10.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Rayonier (RYN). Shares have lost about 10.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rayonier 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.

Rayonier Earnings Beat Estimates in Q4, Revenues Lag

Rayonier reported fourth-quarter 2019 earnings per share of 12 cents, surpassing the Zacks Consensus Estimate of 10 cents. This also compares favorably with the prior-year quarter earnings of 2 cents per share.

The quarterly performance reflects improved operating income in Southern (NYSE:SO) Timber aided by higher non-timber income and increase in harvest volumes. Also, the Real Estate segment’s results highlight an increase in the number of non-strategic/timberland and unimproved development acres sold.

Revenues were up 7.6% year over year to $178.8 million but missed the Zacks Consensus Estimate of $190 million.

For 2019, the company reported earnings per share of 46 cents, down from 79 cents earned in the prior year. Revenues of $711.6 million also declined 12.8% year over year.

Segmental Performance

During the reported quarter, operating income at the company’s Southern Timber segment came in at $12 million, up from $7.2 million in the prior-year quarter. This upside resulted from higher non-timber income, increased volumes, lower lease related expenses and reduced depletion rates. However, the positives were partially offset by a drop in net stumpage prices.

The Pacific Northwest Timber segment reported an operating loss of $1.3 million, narrower than the operating loss of $4.1 million recorded in fourth-quarter 2018. This was mainly due to higher net stumpage prices, lower road maintenance and other costs and reduced depletion rates, partially offset by an increase in other variable costs.

The New Zealand Timber segment recorded operating income of $9.4 million, down from the year-earlier tally of $12.6 million. Results indicate lower net stumpage prices and higher roading costs, partly offset by higher volumes, increased non-timber income and favorable foreign exchange impacts.

Real Estate’s operating income of $12.7 million was significantly up from the year-ago $4.6 million. This was chiefly due to a higher number of acres sold, partially muted by a drop in weighted-average prices.

The Trading segment reported operating loss of $0.3 million in the quarter against operating income of $0.3 million in the year-earlier quarter. This suggests lower margins due to port congestion and reduced availability of third-party export volume resulting from overall market price declines.

Liquidity

Rayonier ended the fourth quarter with $68.7 million in cash and cash equivalents, down from $148.4 million recorded as of Dec 31, 2018. Total long-term debt was $973.1 million, marginally up from $972.6 million as on Dec 31, 2018.

Outlook

Management expects to achieve 2020 net income attributable to Rayonier of $47-$57 million and adjusted EBITDA of $245-$270 million. This is excluding the impact of the company’s expected mid-year acquisition of Pope Resources.

In the Southern Timber segment, the company expects to achieve full-year harvest volumes of 6.3 to 6.5 million tons, while in the Pacific Northwest Timber segment, the company projects harvest volumes of 1.4-1.5 million tons. In the New Zealand Timber segment, harvest volumes are expected at 2.6-2.7 million tons. Further, the company expects a notable increase in adjusted EBITDA in its Real Estate segment, based on current pipeline of transactions. However, the company anticipates that real estate activity will be greatly weighted to the second half of this year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -58.33% due to these changes.

VGM Scores

Currently, Rayonier has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. Notably, Rayonier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.