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NEW YORK (TheStreet) -- Plum Creek Timber (PCL) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PLUM CREEK TIMBER CO INC (PCL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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.
- 38.40% is the gross profit margin for PLUM CREEK TIMBER CO INC which we consider to be strong. Regardless of PCL'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 16.26% trails the industry average.
- PLUM CREEK TIMBER CO INC's earnings per share declined by 22.7% in the most recent quarter compared to the same quarter a year ago. 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, PLUM CREEK TIMBER CO INC increased its bottom line by earning $1.31 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 12.2% in earnings ($1.15 versus $1.31).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PCL has underperformed the S&P 500 Index, declining 17.16% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 15.3% when compared to the same quarter one year ago, dropping from $72.00 million to $61.00 million.
- You can view the full analysis from the report here: PCL Ratings Report