Rating Change #3
Plum Creek Timber Co Inc (PCL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
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Highlights from the ratings report include:
- PCL's revenue growth has slightly outpaced the industry average of 18.0%. Since the same quarter one year prior, revenues rose by 21.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PLUM CREEK TIMBER CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, PCL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- PLUM CREEK TIMBER CO INC's earnings per share declined by 21.7% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, PLUM CREEK TIMBER CO INC reported lower earnings of $1.19 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 6.7% in earnings ($1.11 versus $1.19).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 23.7% when compared to the same quarter one year ago, dropping from $38.00 million to $29.00 million.
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