Weyerhaeuser Company (WY - Analyst Report) reported lower-than-expected bottom and top line results for fourth-quarter 2014. Adjusted earnings came in at 27 cents per share, increasing 42.1% year over year from 19 cents in the year-ago quarter. However, the bottom line failed to meet the Zacks Consensus Estimate of 28 cents.

The year-over-year improvement can be attributed to a 10.2% decline in share count due to the company’s ongoing share buyback activities.

Including one-time restructuring, impairment and other charges of 1 cent and gain on post retirement plan amendment of 5 cents, Generally Accepted Accounting Principles (“GAAP”) earnings in the quarter were 31 cents per share.   

For 2014, Weyerhaeuser reported adjusted earnings of $1.25 per share, up compared with the year-ago tally of 99 cents per share, but below the Zacks Consensus Estimate of $1.30.

Revenues

Weyerhaeuser’s net sales in the quarter inched up 1.1% year over year to $1,788 million. However, the top line lagged the Zacks Consensus Estimate of $1,809 million.

Weyerhaeuser reports its revenues under the following segments:

Revenues from the Timberland segment fell 1.4% year over year to $359 million. It accounted for 20% of net sales.

The Wood Products segment generated revenues of $947 million, up 2.3% year over year and accounting for 53% of net sales.

The Cellulose Fibers segment’s revenues rose 0.8% year over year to $482 million, representing 27% of net sales.

For 2014, the company’s net sales totaled $7,403 million, increasing 2.1% year over year but lagging the Zacks Consensus Estimate of $7,730 million.

During the year, Weyerhaeuser completed the divestiture of its real estate business to Tri Ponte Homes, Inc. (TPH - Snapshot Report), recording a gain of $1 billion in the third quarter.
 
Margins

Weyerhaeuser’s cost of sales inched down 0.9% year over year, representing 78.2% of total revenue versus 79.9% in the year-ago quarter. Selling, general and administrative expenses were 6.6% of total revenue, decreasing from 11.9% in the prior-year quarter. Research and development expenses stood at about $8 million as against $10 million in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization ("EBITDA") came in at $376 million versus $345 million in the year-ago quarter. EBITDA margin in the quarter was 21%.

Balance Sheet

Exiting fourth-quarter 2014, Weyerhaeuser had cash and cash equivalents of $1,580 million, down 2.5% from $1,620 million in the preceding quarter. Long-term debt was flat at $4,891 million.
 
Cash Flow

In fourth-quarter 2014, Weyerhaeuser generated net cash of $304 million from its operating activities, down 12.6% from $348 million in the year-ago quarter. Capital spending increased 4.5% to $115 million.

In 2014, the company paid dividends amounting to $563 million, and repurchased shares worth $203 million.

Outlook: For first-quarter 2015, Weyerhaeuser expects sequentially higher earnings from the Timberland segment. Improved domestic log volumes and realizations in the west U.S. will be partially offset by lower fee harvest volume in the south U.S. Also, earnings from disposition of non-strategic timberlands are projected to improve in the quarter.

For the Wood Products segment, sequentially higher earnings are expected to be driven by higher sales and production volumes of all products, as well as better realization for lumber and oriented strand board. However, these will be partially offset by higher log costs.

For the Cellulose Fibers segment, management anticipates sequentially lower earnings due to reduced pulp price realizations and higher maintenance expenses. Also, shipments of liquid packaging board will decline, while price realization will improve.

With a market capitalization of $18.6 billion, Weyerhaeuser currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the building products industry include Boise Cascade Company (BCC - Snapshot Report) and Rayonier Inc. (RYN - Snapshot Report), both carrying a Zacks Rank #2 (Buy).