Plum
Creek timber, a timberland management company is down today, following earnings report and downgrades to sell by analysts. In my opinion, the down grade was well deserved. In yesterday’s earnings report, company lowered
its outlook for 2012, sighting weak timber demand. While the street was
expecting earnings to be around $1.35, company now estimate the earnings to be
between $1 and 1.25 for 2012.
Does
Plum Creek Timber deserve its rich multiple of 34 times earning?
PCL earned $1.31 per share for 2010 and $1.19
per share for 2011. Like the company said, 2012 earnings could come in lower
than 2012 because housing market doesn't seem to be rebounding any time soon.
Only thing saving the stock price is its
dividend. Stock has a current dividend of $1.68 yielding better than 4%. That
is pay out of more than $270 million in dividends by a company that expects to
earn around $170 million for 2012. PCL assured that dividends will be intact because
it plans on selling real estate worth $275 to $325 million in 2012.
This stock is worth no more than $35 and will
test its December lows in the next 4 weeks, in my opinion. I am buying March, 2012
$38 puts, to test my theory.
Courtesy: Yahoo Finance
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