Weyerhaeuser Company (WY): A Strategic Timberlands Deal

Rayonier also has a higher valuation. At $55.40 per share, Rayonier is worth $6.9 billion on the market. The market values Rayonier Inc. (NYSE:RYN) at 20.5 times its forward earnings. In the past twelve months, Rayonier generated around $370 million in operating income, or 80% of its  total profits, from its Performance Fibers segment while its Real Estate and Forest Resources segments contributed $42 million and $51 million, respectively. The company has been implementing a $375 – $390 million project to convert 260,000 metric tons of absorbent materials to 190,000 metric tons of cellulose specialty material. This project will strengthen the company’s market leadership, increasing the growth of its Cellulose Specialties segment. The company reported that the project was quite attractive with 17%-20% internal rate of return, generating strong free cash flow. Rayonier Inc. (NYSE:RYN) also offers its shareholders a higher dividend yield than Weyerhaeuser, at 3.2%.

My Foolish take

The acquisition of Longview Timber will indeed enhance Weyerhaeuser Company (NYSE:WY)’s potential value. With its global leading positions, the lowest forward earnings valuation among its peers, a decent dividend yield, and the potential for annual operational and cost synergies, Weyerhaeuser could be a good buy for long-term investors at its current trading price.

The article A Strategic Timberlands Deal originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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