We recently compiled a list of the 12 Best Land and Timber Stocks to Buy According to Analysts. In this article, we are going to take a look at where West Fraser Timber Co. Ltd. (NYSE:WFG) stands against the other best land and timber stocks.
The Land and Timber Sector: Current Trends and Future Outlook
The land and timber sector plays a vital role in both economic and environmental contexts. This sector not only provides essential materials like wood and paper but also significantly contributes to job creation and economic stability. The sector creates direct jobs, along with additional indirect and induced employment opportunities across various sectors such as logging, transportation, and manufacturing.
According to the American Forest and Paper Association, the forest products industry in the United States employs about 925,000 people directly. Additionally, it supports over 2 million jobs indirectly. This industry ranks among the top ten manufacturing employers in 43 states and contributes roughly 5% to the overall manufacturing GDP of the country.
READ ALSO: 13 Best Farmland and Agriculture Stocks To Invest In According to Hedge Funds and 10 Best Low Priced Technology Stocks To Buy Now.
This sector encompasses activities related to forestry, logging, timberland management, and the production of wood products. It includes various processes such as harvesting trees, sawing logs into timber, and manufacturing wood-based products like furniture and paper. Timber companies play a vital role in managing forests sustainably. There is a growing shift towards more sustainable forestry practices and increased investment in timberland as an asset class. This trend is driven by a growing awareness of the environmental benefits of forestry. As consumers become more environmentally conscious, there is an increasing preference for products sourced from responsibly managed forests.
Another significant trend is the expansion of timber’s role in construction. With a focus on reducing carbon footprints, many builders are turning to timber as a renewable alternative to traditional materials like steel and concrete. Timber’s versatility allows it to be used in various applications, from residential homes to commercial buildings. Additionally, advancements in technology are streamlining operations within the industry, making logging and processing more efficient while minimizing environmental impact.
The J.P. Morgan Asset Management Timberland Outlook for 2024 indicates that cash yields and value growth for timberland assets are expected to grow, driven by housing and lumber demand. This trend is expected to continue into 2025 as interest rates gradually decline, making homes more affordable. Despite a slowdown in global saw timber demand in 2023 due to weaker economic activity in China and rising US interest rates, housing starts in the US remained robust. The ongoing shortage of homes, combined with low existing home sales, has increased the need for new construction.
Looking ahead, J.P. Morgan Asset Management anticipates strong cash yields from timberland assets, with prices and yields expected to rise further in 2025 and beyond. As the demand for sustainable investments grows, timberland is seen as a valuable asset class that can provide both economic benefits and contribute to climate solutions.
Methodology
To compile our list of the 12 best land and timber stocks to invest in according to analysts, we reviewed financial media reports and consulted various online resources including timber ETFs. We focused on the top land and timber stocks that analysts believe have the most potential for growth. We ranked the 12 best land and timber stocks to invest in based on their average price target upside potential according to analysts as of December 27, 2024.
Additionally, we mentioned the hedge fund sentiment surrounding each stock, which was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A lumber mill with pristine forests in the background, showing the company’s commitment to renewable energy.
West Fraser Timber Co. Ltd. (NYSE:WFG)
Average Price Target Upside Potential According to Analysts: 36.54%
Number of Hedge Fund Holders: 21
West Fraser Timber Co. Ltd. (NYSE:WFG) is a leading Canadian forestry company that produces a diverse range of wood products, including lumber, plywood, medium-density fiberboard, oriented strand board, plywood, pulp, paper, and wood chips. With over 60 facilities across Canada, the US, the UK, and Europe, West Fraser Timber Co. Ltd. (NYSE:WFG) supplies materials for home construction, industrial applications, and paper products. The company emphasizes sustainable forestry practices to ensure responsible management of its resources.
In the third quarter of 2024, West Fraser Timber Co. Ltd. (NYSE:WFG) reported sales of $1.437 billion, down from $1.705 billion in Q2 2024. The adjusted EBITDA was $62 million, reflecting a 4% margin. This decline was partly due to a $32 million export duty related to lumber from the previous year and mixed demand across its product lines. While there was strong demand for Spruce-Pine-Fir (SPF) lumber and engineered wood products, Southern Yellow Pine (SYP) lumber faced challenges due to a slowdown in repair and remodeling markets.
Despite market challenges, the company has a trailing four-quarter adjusted EBITDA of $630, up from the $561 million reported at year-end 2023. Additionally, West Fraser Timber Co. Ltd. (NYSE:WFG) maintains a robust financial position with over $2 billion in liquidity at the end of the third quarter. The company repurchased 446,460 shares for $35 million during the third quarter of 2024, showcasing its commitment to returning value to shareholders.
In September 2024, West Fraser Timber Co. Ltd. (NYSE:WFG) announced it would indefinitely curtail operations at its Lake Butler sawmill in Florida due to high fiber costs and weak lumber markets. This strategic move is aimed at aligning production capacity with current demand levels. With its diversified product offerings, strong financial health, and proactive management strategies, West Fraser Timber Co. Ltd. (NYSE:WFG) presents a compelling investment opportunity.
Overall, WFG ranks 2nd on our list of the best land and timber stocks to buy according to analysts. While we acknowledge the potential of WFG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WFG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.