RYN 011212
Rayonier Inc (RYN)
Could Rayonier be the best derivative play for the housing market
recovery?
Company Description &
Developments
There seems to be ever increasing chatter about the housing
recovery. 2012 is supposed to be the year the housing not
only stabilizes but begins to work its way higher. Of course,
folks have been saying this since 2009, but who’s counting?
The reality is that
housing prices are still dropping, but they are dropping slower
than they have been. Inventories are also coming down along
with supply. Homebuilders have throttled back their
production and taken some serious haircuts during the
downturn. Rents rates have gone through the roof and while
condos and houses may still have vacancies, apartments are in
demand and occupied.
Something’s got to
give - Cheap mortgage rates, modestly improving economic picture
and cheap housing should be good kindling for a fire under the bum
of the housing market.
Even Jim Cramer is
jumping on the bandwagon, recently recommending Weyerhaeuser for
the housing recovery.
Like
Weyerhaeuser, Rayonier is a REIT that sells wood products.
Slightly different is the way Rayonier business is split up into
the following 3 categories:
(from their
site)
Forest Resources
As one of the largest private landowners in the U.S., we own, lease
or manage approximately 2.4 million acres of working forests in the
U.S and New Zealand to supply timber to a wide variety of markets
including pulp, paper, lumber, renewable energy production and
other wood products.
Performance
Fibers
Rayonier produces two types of high-quality Performance Fibers:
cellulose specialties – which are used in everything from filters
and LCD screens to pharmaceuticals – and fluff pulp, which is used
in disposable diapers and other absorbent products.
Real Estate
At Rayonier, we evaluate each acre of our timberland to determine
its greatest potential and highest and best use. In some cases,
land that was once best suited for growing timber is now more
valuable for residential, industrial, commercial or conservation
use. Our real estate subsidiary provides added value by entitling
or selling these properties.
Sometimes we need to look beyond just
building houses and as a derivative of the housing recovery, RYN
may be an interesting choice.
Financial Profile
As a solid mid-capper, Rayonier is trading a little over 20 times
trailing earnings (P/E). Generally REITs, which throw of the
bulk of their profits in dividends, tend to carry a slightly higher
P/E and that number also tends to be steadier. Rayonier is
expected to earn $2.12 in FY2011 according to the Zacks Consensus
Estimate.
As a Zacks Rank
1, Rayonier isn’t a slouch. In their last report Rayonier showed
38.31% year over year growth on about 217.58 million in net
income.
Currently,
Rayonier is throwing off a quarterly dividend of $.40, with an
annual yield of 3.56%. Over the past 5 years, Rayonier has
averaged 4.51 percent in dividend yield.
That’s not to say
that the stock hasn’t had good price appreciate in addition to that
income. If Rayonier sees more income, you can bet that div
will rise. Over the past 10 years Rayonier shareholders have
gotten an average of over 17% on their equity.
Earnings Estimates
Expectations are for Rayonier to make 49 cents this quarter when
they report on January 24th. Earnings estimates have fairly
stable over the past two months. 90 days ago we had a small
drop in consensus estimates, but in a housing market and an average
global economy that is shaky, one might expect
this.
Rayonier
surprised analysts to the upside by 31.48% last quarter, with an
average upside surprise over the years of 13.84%
We did get one
analyst downgrade his current quarter estimate, but at the same
time increase next year’s estimates higher. That makes
logical sense to me, so we shouldn’t view it as a net negative.
Market Performance & Techincals
Rayonier is currently trading just under its 52 week high of
$45.65. Over the past year Rayonier has outpaced the S&P
500 by 18.78% and in the past 3 months alone has gained 7% against
the index.
The last month or
so has been good to this stock, with shares up $5 or 12.5 percent
since December 14th, 2011.
Rayonier is
firming in a bulling ascending channel, and firmly above its 50 and
200 day moving averages, which is a bullish sign. Volume has
been dropping off as of late, so watch for lack of conviction
here. Look for $44 as support and perhaps a trigger for
entry.
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RAYONIER INC (RYN): Free Stock Analysis Report
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