JACKSONVILLE, Fla. ( TheStreet) -- Rayonier ( RYN) got a boost in Tuesday trading after the
real estate investment trust topped Wall Street's earnings expectations despite a decline in the line item.
Rayonier, which manages timberland and the production and sales of forest products and specialty cellulose fibers and fluff pulp, said its fourth quarter net income came in at $59 million, or 72 cents per share, down from year-earlier earnings of $98 million, or $1.21 per share.
Timber REIT peer Plum Creek Timber ( PCL) was recently upgraded to neutral, from underperform, by analysts at Zacks Investment Research who had a $42 price target on the stock. Analyst Meena Goyal noted that "we are changing our long-term recommendation for Plum Creek from Underperform to Neutral as we anticipate it to perform in line with the broader market."
housing markets and demand for real estate properties across the country provides a strong economic backdrop for the company to demonstrate solid financial performance in the future," the analyst added. "However, the cyclical nature of the business, cutthroat competition, and strict environment policies undermines its growth potential." Rayonier has a market cap of around $4.5 billion, and a current dividend yield of around 3.8%. Timber REITs outperformed both the overall equity REIT market and the S&P 500 in 2010, though Rayonier outpaced the group with a total return of 29.8%. Timber peer Potlatch ( PCH) returned 6.7% while Plum Creek returned just 2.3%.
KBW noted that timber REITs limited harvest volumes as much as 30% below sustainable outputs in 2010 as a means of maximizing trees rather than selling into a depressed market. As such, the research firm expects 25% growth in EBITDA for the year despite profits remaining 50% below peak levels in 2005 and 2006. KBW analyst Sheila McGrath said
November housing starts -- which ticked up a better-than-expected 3.9% to a seasonally adjusted annual rate of 555,000 yet remain 5.8% below year-earlier rates -- need to reach 1 million "before we see a meaningful increase in sawlog pricing." Housing starts fell 4.3% in December. With the supply of unsold new-home inventories near 10-months, she doesn't expect a housing recovery until 2012, meaning 2011 estimates are still too high and are likely to decline, and that dividend payments are likely to remain under pressure. In early December analysts from Stifel Nicolaus initiated coverage of the forestry products and timberland REIT with a buy rating and $60 price target. Wells Fargo initiated coverage of Rayonier in the week prior, also giving it a buy rating and $60 price target. On Jan. 4, 2011 Rayonier director Paul Kirk sold 1,000 company shares at $55.62 per share for $55,620. -- Written by Miriam Marcus Reimer in New York. >To contact the writer of this article, click here: Miriam Reimer. >To follow the writer on Twitter, go to http://twitter.com/miriamsmarket. >To submit a news tip, send an email to: email@example.com. >To see these stocks in action, visit the 10 Top Buy-Rated Real Estate Stocks portfolio on Stockpickr.
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