Plum Creek Timber Disappoints, Guides Lower

| About: Plum Creek (PCL)
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Plum Creek Timber Co. Inc. (NYSE:PCL) reported third quarter 2010 earnings of 20 cents per share, coming short of the Zacks Consensus Estimate of 24 cents per share. Earnings were up 66.7% from the previous-year quarter.

Revenues not only dropped 11.9% from the previous-year quarter to $259 million, but were short of the Zacks Consensus of $272 million. Revenues were affected by the 46.6% decline in the Real Estate segment.

Gross profit increased 22.4% from the previous year quarter to $71 million. Gross margins increased 7.7 percentage points to 27.4%.

Operating income increased 34.2% from the year ago quarter to $51 million. Operating margin increased from 12.9% in the previous year quarter to 19.7%.

Quarter Ahead

For the forthcoming quarter, the company expects the overall timber markets to remain stable and prices to be favorable. The fourth-quarter Real Estate segment sales are expected to be between $140 million and $160 million, including the $89 million third phase of the Montana conservation sale scheduled to close in the fourth quarter. Earnings are expected to be in the range of 40 cents to 47 cents per share for the fourth quarter and the full year 2010 earnings to be in between $1.28 per share to $1.35 per share. This is below the current Zacks Consensus Estimates of 54 cents for the fourth quarter and $1.54 for the full-year 2010.

Estimates for the quarter had been trending down in the run-up to the earnings release, with one analyst lowering estimates in the last 30 days. Over the last thirty days, there has been one negative and one positive revision for the 2011 estimates. The current Zacks Consensus Estimate for 2010 is $1.46 per share.

We currently have a Zacks # 3 rank for PCL which translates in to a Hold rating in the short term.