Weyerhaeuser (WY) Stock Down Following Plum Creek Merger

Weyerhaeuser (WY) stock is lower following a deal to acquire Plum Creek (PCL).
By Amanda Schiavo ,

NEW YORK (TheStreet) --Shares of Weyerhaeuser (WY) - Get Report are slipping by 2.02% to $29.79 in pre-market trading on Monday, after the real estate investment trust announced Sunday that it agreed to merge with Plum Creek (PCL), with the combined company expected to have an equity value of $23 billion.

Plum Creek is a private timberland owner in the U.S., the stock is currently up more than 15% this morning.

The agreement between the two companies will create "the world's premier timber, land and forest production company." The new company will have over 13 million acres of the "most productive and diverse timberland in the U.S.," Weyerhaeuser said in a statement.

The agreement was unanimously approved by the boards of both companies. As part of the deal Plum Creek shareholders will receive 1.60 shares of Weyerhaeuser for each share of Plum Creek held.

"With an extraordinary set of combined assets and the proven value creation records of both Weyerhaeuser and Plum Creek, the combined company will offer a compelling opportunity for shareholders," Plum Creek CEO Rick R. Holley said in a statement.

The companies expect the deal to close in the late first quarter or early second quarter of fiscal 2016.

TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUScharitable trust portfolio commented on the merger earlier saying: "It is a terrific combination because the possibility of a distribution just coming from the synergies is terrific."

Separately, TheStreet Ratings team rates WEYERHAEUSER CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate WEYERHAEUSER CO (WY) a BUY. This is driven by a number of strengths, 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 reasonable valuation levels and notable return on equity. We feel its 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:

  • WEYERHAEUSER CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, WEYERHAEUSER CO increased its bottom line by earning $1.38 versus $0.83 in the prior year. For the next year, the market is expecting a contraction of 25.0% in earnings ($1.04 versus $1.38).
  • WY, with its decline in revenue, underperformed when compared the industry average of 6.0%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WEYERHAEUSER CO's return on equity is below that of both the industry average and the S&P 500.
  • WY has underperformed the S&P 500 Index, declining 9.60% from its price level of one year ago. 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.
  • You can view the full analysis from the report here: WY

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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