On Thursday, Seaport Global Securities maintained a Buy rating on Potlatch (NASDAQ:PCH), with a consistent price target of $55.00. The firm's analysts have adjusted their earnings estimates following Potlatch's third-quarter results, which were stronger than expected, and a gradual improvement in lumber prices. The estimated EBITDA for 2024 has been raised to $223 million from $211 million, and the 2025 forecast has increased to $253 million from $250 million, thanks to the recently completed Waldo project.
The adjustments to earnings per share (EPS) are notably more substantial due to an unexpected decrease in depreciation associated with the Waldo project. The analyst highlighted the positive outlook for lumber pricing, despite uncertainty about the trend's sustainability during the typically slower year-end months. The setup for 2025 appears optimistic, especially if interest rates begin to decline again, which could potentially lead to a surge in lumber prices.
Potlatch's stock performance has been underwhelming year-to-date, with a return of negative 12%. However, the analysis suggests that the stock is currently undervalued when considering Seaport Global's sum-of-the-parts valuation range of $47 to $72. The valuation does not fully account for Potlatch's potential alternative land use and carbon-related opportunities, such as solar energy projects, carbon credits, lithium deposits, and carbon capture storage (CCS).
Seaport Global's reiteration of the Buy rating and the $55 price target reflects a belief in Potlatch's attractive valuation and the company's prospects for growth, particularly with the added benefits from the Waldo project and potential market conditions favoring a price increase in the coming year.
In other recent news, PotlatchDeltic (NASDAQ:PCH) has reported mixed results for the third quarter of 2024. The company's adjusted EBITDDA fell to $46 million, down from $103 million in the previous quarter, largely due to a significant land sale. However, PotlatchDeltic remains optimistic, highlighting strong demand for real estate and expected improvements in lumber demand. Despite facing challenges in the Wood Products segment due to weak lumber markets, the company's Timberlands division maintained steady performance.
PotlatchDeltic also revealed plans for expansion into natural climate solutions, including solar development and lithium opportunities. The company returned $27 million to shareholders through share repurchases, indicating a strategic focus on growth and shareholder value. In terms of future expectations, the company anticipates a comparable adjusted EBITDDA for the fourth quarter and a 5% rise in lumber prices.
InvestingPro Insights
To complement Seaport Global's analysis, InvestingPro data offers additional insights into Potlatch's financial position. Despite the underwhelming year-to-date performance noted in the article, InvestingPro Tips reveal that Potlatch has maintained dividend payments for an impressive 54 consecutive years, underlining the company's commitment to shareholder returns. This consistency aligns with the current dividend yield of 4.28%, which may appeal to income-focused investors.
The company's price-to-earnings ratio stands at a high 202.5, suggesting that investors are pricing in significant future growth, possibly in line with the optimistic outlook for 2025 mentioned in the article. However, it's worth noting that Potlatch's revenue for the last twelve months as of Q3 2024 was $1,058.43 million, with a modest growth of 3.49%. This growth, coupled with the completion of the Waldo project, could support the increased EBITDA forecasts highlighted by Seaport Global.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Potlatch, providing a deeper understanding of the company's financial health and market position.
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