Raymond James downgraded shares of Weyerhaeuser (NYSE:WY) and PotlatchDeltic (NASDAQ:PCH) to Market Perform in a note Monday, stating the lumber/OSB pricing outlook remains challenged.
Analysts wrote that overall, the firm is also reducing its Timber REIT sector recommendation to Market Weight from Overweight.
"Coming out of 3Q earnings season and following our recent management meetings at the NAREIT conference in Los Angeles, we are opting to incorporate a more conservative 4Q and 2024 outlook for wood products commodity pricing in lumber and OSB, as well as lower projected sawtimber realizations," the analysts explained.
"Despite resilient strength in the pace of single-family home production (starts up 13% y/y in October), cash market price realizations across the lumber composite indices have drifted to new YTD lows in November ($376/mbf as of Nov. 23, down 19% y/y)," they added.
The firm now believes it prudent to adjust its expectations for 4Q earnings and reset its 2024 commodity expectations.