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Why Rayonier (RYN) Is Gaining Today

NEW YORK (TheStreet) -- Rayonier (RYN) gained 8.9% to $44.72 Monday after the wood pulp producer announced it will split into two companies.

The split will spin off the performance fibers business into a separate company from the forest resources and real estate segments. The forest resources and real estate company will retain the Rayonier name, while the performance fibers company will take a new name that is as yet undecided.

Rayonier chairman and CEO Paul Boynton will be the CEO of the new performance fibers company. "The company has evolved into two distinct businesses and investment opportunities," Boynton said in a statement. Both companies will be public, and both expect to pay dividends to shareholders.

The split is expected to complete sometime in the middle of 2014.

TheStreet Ratings team rates Rayonier as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RAYONIER INC (RYN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • 39.19% is the gross profit margin for RAYONIER INC which we consider to be strong. Regardless of RYN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.90% trails the industry average.
  • RAYONIER INC's earnings per share declined by 27.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, RAYONIER INC reported lower earnings of $2.13 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus $2.13).
  • RYN, with its decline in revenue, slightly underperformed the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of RAYONIER INC has not done very well: it is down 24.22% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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