Western Forest – Earnings Update & Thoughts

Western Forest Stock

Western Forest Products Stock Update

Yesterday, Western Forest released their 3rd quarter results.

So far, the market seems to be reacting to Western Forest negatively,  the stock is down over 3% as of writing this.  Personally, I thought the earnings report was fine, and mostly as expected, I am still long on this stock.  You can view the FULL earnings release HERE.

Below are highlights & my thoughts.

3rd Quarter Highlights:

• Delivered third quarter adjusted EBITDA of $32.3 million and net income of $15.1 million
• Achieved Company record quarterly average realized lumber price of $1,124 per thousand board feet
• Increased internal saw log consumption to 82% from 76% in the third quarter of last year
• Accelerated capital invested to $20.7 million, including $5.9 million at our Arlington facility
• Entered into a new $250 million credit facility that includes an additional $100 million accordion feature
• Returned $8.8 million to shareholders via the Company’s recently increased quarterly dividend
• Completed $10.4 million of share repurchases, cancelling 4.6 million common shares

Year to date, EBITDA is up 10% from the same time last year.  Year to date net income is also up around 15%.

Western Forest knows that the current drop in share price (due to US trade relations & seasonal weakness/lower lumber prices) wont last forever. They have taken this opportunity to buy back over $10 million in share repurchases. Even with a dividend increase earlier this year, the dividend is easily covered by earnings and the company has no debt.  The stock has dropped 2.55% since earnings were released, I expect mostly due to decreased demand and the uncertainty with US trade relations.  I am still long on this stock, and think management should continue to buy back shares. I recently added to my position. You can read more about that purchase HERE

As of writing, Western Forest is trading at $1.91 per share.  This represents a discount of over 35% from its 52 week high.  On earnings, the stock looks cheap as well – currently trading at just 9.8x.

Summary:

As long as you are patient, you can sit back and enjoy a safe 4.59% yield while you wait for the stock price to come back up.

 

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