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

This quarter, though, pricing trends haven’t been as favorable, with lumber prices losing as much as 25% of their value before bouncing back somewhat. Moreover, Plum Creek has faced more of a competitive threat from rival Weyerhaeuser Company (NYSE:WY), which bought up 645,000 acres of prime Pacific Northwest timberland from Brookfield Asset Management Inc. (USA) (NYSE:BAM) and its Brookfield Infrastructure Partners L.P. (NYSE:BIP) affiliate last month. The buy gives Weyerhaeuser Company (NYSE:WY) more assets with easy access to export markets across the Pacific Ocean in Asia, although the Pacific Northwest does have closer proximity to areas destroyed by the mountain pine beetle.

Even with those unfavorable conditions, though, fellow forest-products REIT Rayonier Inc. (NYSE:RYN) reported second-quarter sales that more than doubled from year-ago levels thanks to the company’s boost in ownership of a joint venture in New Zealand from 26% to 65%. Even excluding those effects, higher sawlog demand in its Gulf of Mexico region and strong export demand for its Pacific Northwest products offset higher logging costs. Those gains were much healthier than what Rayonier Inc. (NYSE:RYN) experienced in its performance-fibers division, but the company expects to exit the higher-cost portion of that business segment. Rayonier Inc. (NYSE:RYN)’s results set the stage for similar performance from Plum Creek.

In the Plum Creek earnings report, watch for the REIT to discuss any strategic plans it may have to make land acquisitions or buy other assets. In addition, comments about the state of the housing market in light of rising interest rates could point toward Plum Creek’s ability to keep growing strongly in the quarters and years to come.

The article How High Can Plum Creek Earnings Grow? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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