For Weyerhaeuser (WY) investors, current conditions may feel a bit Dickensian – it’s among the best of times with respect to lumber and oriented strand board (or OSB) prices, and the housing market looks healthy, but a relatively soft dividend yield and limited guidance leave investors wanting more. On top of that, for all of the words written over the decades about the value in owning timber assets, Weyerhaeuser has been a sustained underperformer, even when the dividends are included.
It’s going to take time for the industry to catch up on capacity, and the OSB market has been shockingly restrained, though I’m sure the pandemic has “helped” in that regard. In any case, while I do believe that 2021 EBITDA could be 20% or more above Weyerhaeuser’s long-term full-cycle average, it’s looking likely that 2022 will be at least 20% below. I do see some undervaluation here, but given the volatility in the business and the long-term track record, it’s not a compelling must-buy for me.
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Weyerhaeuser Harvesting Record High Prices, But The Good Times Never Last
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