On Monday, Raymond (NS:RYMD) James upgraded shares of PotlatchDeltic Corporation (NASDAQ:PCH) from Market Perform to Outperform, setting a price target of $45.00. The firm's decision follows PotlatchDeltic's fourth-quarter results and a recent model update.
The $3.05 billion market cap company has attracted positive analyst attention, with InvestingPro data showing four analysts recently revising earnings estimates upward. The upgrade reflects the analyst's view of the timberland real estate investment trust's prospects amid current market conditions.
The analyst cited several factors influencing the upgrade, including the resilience of single-family home production, with permits in November showing only a slight year-over-year decline of approximately 3%. Additionally, year-to-date curtailments and a significant increase in Canadian softwood lumber duties have led to higher cash market price realizations for lumber.
As of December 13th, the lumber composite index price stood at approximately $430 per thousand board feet (MBF), with the fourth quarter to-date average at $428 per MBF.
Notably, PotlatchDeltic has maintained dividend payments for 54 consecutive years, currently offering a 4.65% yield. (InvestingPro subscribers can access 12 more key insights about PCH's financial health.)
The more favorable market setup prompted Raymond James to adjust its lumber price realizations for PotlatchDeltic. The firm now anticipates an average price of roughly $425 per MBF for 2024, up from the previous estimate of $410 per MBF. Furthermore, the analyst projects moderate pricing gains into 2025, with expectations of a lumber price realization around $475 per MBF.
PotlatchDeltic's stock upgrade to Outperform by Raymond James reflects a positive outlook based on the recent performance and anticipated market conditions. The price target of $45.00 suggests a level of confidence in the company's ability to benefit from the current dynamics in the lumber market.
In other recent news, PotlatchDeltic reported mixed Q3 earnings, with adjusted EBITDA falling to $46 million, largely due to a significant land sale. Despite challenges in the Wood Products segment, the Timberlands division maintained steady performance. The company has plans for expansion into natural climate solutions, including solar development and lithium opportunities, and returned $27 million to shareholders through share repurchases.
BMO Capital Markets upgraded Potlatch's stock from Market Perform to Outperform, citing the potential benefits from upcoming changes in export duties on lumber from Canada. This aligns with four analysts who have recently revised their earnings estimates upward. Seaport Global Securities also maintained a Buy rating on Potlatch, citing the company's attractive valuation and potential for growth, particularly with benefits from the recently completed Waldo project.
These recent developments suggest that Potlatch is strategically positioning itself for future growth despite current market challenges. Analysts from both BMO Capital Markets and Seaport Global Securities anticipate a positive financial outlook for the company, with an emphasis on the potential rise in lumber prices and the strategic advantages of the company's unique pricing arrangement.
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