TheStreet Cuts Down Plum Creek Timber (PCL) Stock

NEW YORK (TheStreet) -- Shares of Plum Creek Timber  (PCL) are up 0.8% to $40.85 in afternoon trading on Thursday, one session after the company released its fourth quarter financial results.

Separately, TheStreet Ratings downgraded the stock to a "hold" rating from "buy" while also lowering its letter grade to C from B. TheStreet identified several strengths in the company, including expanding profit margins and notable return on equity. However, as a counter to these strengths, it also found weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.

The Seattle-based timber company reported fourth quarter earnings of $34 million, or 23 cents per share on an adjusted basis, ahead of analysts' expectations of earnings of 16 cents per share. The company reported revenue of $323 million in the period beating analysts' $310.8 million guidance.

For the year, the company made a profit of $197 million, or $1.12 per share on revenue of $1.45 billion. 

In November last year, Plum Creek announced that it had agreed to a merger with real estate investment trust and fellow timberland owner Weyerhaeuser (WY). The company said that it took a transaction cost of 4 cents per share in the quarter related to the pending merger.

(Subscribers get upgrades and downgrades ahead of the market. Find out more onTheStreet Quant Ratings here.)

On Thursday, TheStreet chartist Bruce Kamich commented on the company's chart.

"Take a minute to look at this chart of PCL, above. It surges to the upside in November with a huge gap on the upside and huge volume. Unfortunately, the story does not have a happy ending, as the rally quickly evaporates and prices tumble below where the rally started! Insult to injury? We also want to point out that the On-Balance-Volume (OBV) line is now below its November low. The Moving Average Convergence Divergence (MACD) oscillator went to a sell signal at the beginning of January when it crossed below the zero line," Kamich said.

"This longer-term chart, above, of PCL shows that probes below $40 were bought over the past two years. However, with the weak technical position of PCL and a weak overall stock market, PCL is at risk to fall further. It could drop to $35 or lower," Kamich concluded.

TheStreet Ratings uses an algorithmic model to determine a rating for risk-adjusted total return prospect over 12 months.

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