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How High Can Plum Creek Timber Co. Inc. (PCL) Earnings Grow?

Plum Creek Timber Co. Inc. (NYSE:PCL) will release its quarterly report on Monday, and thanks to the rebound in the housing market over the past year, makers of wood products for home construction have benefited from favorable economic tailwinds for the first time in years since the end of the housing bubble. Yet even though volatility in lumber prices might limit short-term growth in Plum Creek Timber Co. Inc. (NYSE:PCL) earnings, the long-term prospects for the company look favorable as it has a big competitive advantage over some of its peers in the space.

High Yielding Commodities: Beyond EnergyArguably, the biggest benefit Plum Creek Timber Co. Inc. (NYSE:PCL) and its peers have is the fact that its products are naturally renewable. Yet given that trees take decades to grow to maturity, timber companies have to take a long-term approach to operating their business in order to maximize not only short-term profits but long-term prospects for the company years down the line. Let’s take an early look at what’s been happening with Plum Creek Timber Co. Inc. (NYSE:PCL) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Plum Creek Timber

Analyst EPS Estimate $0.23
Change From Year-Ago EPS 4.5%
Revenue Estimate $302.83 million
Change From Year-Ago Revenue 3%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Will Plum Creek earnings see the light?
Analysts have chopped down their short-term views on Plum Creek Timber Co. Inc. (NYSE:PCL) earnings in the past few months, slashing a third from their June estimates. Yet they’ve reduced their full-year 2013 consensus figures much more modestly, by just $0.04 per share, and the stock has held up reasonably well in light of the dour quarterly forecast, falling 6% since late April.

Plum Creek entered the quarter on a strong note, as the real estate investment trust nearly doubled its earnings in the first quarter. Although its timber business saw solid sales growth of nearly 10%, revenue in its manufacturing and real-estate segments grew at an even more impressive pace. In order to meet heightened demand for lumber and structural panels for construction, Plum Creek Timber Co. Inc. (NYSE:PCL) chose to restart sawmill operations at a plant that hadn’t been active in four years. As a result of its earnings strength, Plum Creek raised its dividend by 5% in May. With its REIT status, Plum Creek has to pay out 90% of its earnings in dividends in order to gain favorable tax benefits.

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