Lumber producer Weyerhaeuser outperforms commodity and stock markets

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  • Since early March, lumber has fallen
  • Stock market down
  • Weyerhaeuser outperformed lumber, S&P 500 in 2022
  • Levels to Watch in WY Stocks
  • If you want to improve your search for new investment ideas, check out InvestingPro+

Wood is the essential building material that trades in the US futures market. Other industrial commodities, like and , trade in highly liquid markets with substantial daily volumes changing hands between buyers and sellers and significant open interest. Although the lumber futures market has been around for decades, it has never reached the critical mass necessary for its market to be liquid.

The lack of volume and open interest makes lumber very volatile, as offers to buy disappear during periods of declines and offers to sell evaporate during rallies, leading to price gaps. is a reference and is not suitable for traders or speculators without the possibility of making or taking delivery of the timber.

Weyerhaeuser (NYSE:) is a leading lumber producer and has one of the largest forest land portfolios in the world. WY opened in 1900 and continues to produce lumber in the United States and Canada on 11 million acres that the company owns or leases.

Prior to 2018, the all-time high for lumber futures prices was the 1993 high of $493.50 per 1,000 board feet. The price exploded higher and imploded lower from 2018 to 2022 and is currently in an implosion phase. Meanwhile, WY stocks have outperformed both lumber and the overall stock market in 2022.

WY operates as a Real Estate Investment Trust (REIT) with a timber call option attached.

Since early March, High Lumber has fallen

In early March, nearby timber futures prices hit a lower high of $1,477.40 per 1,000 board feet. The all-time high was reached in May 2021 at $1,711.20.

Source: bar chart

The chart above shows the steady decline since the March 2022 high, with lumber futures losing more than half their value in early June when they probed below the level of $600. They are now hovering at their lowest price since November 2021.

Downward stock market trend

The index is the most diversified stock market indicator.

S&P 500 daily chart.

Source: bar chart

It stood at 4,766.18 on December 31, 2021. At the 4,121 level at Monday’s close, the index is 13.5% lower in 2022. The S&P 500 has mostly been hitting highs and lows lowest since early January. .

Weyerhaeuser outperformed lumber, S&P 500 in 2022

So far in 2022, Weyerhaeuser stocks have done better than lumber and the first stock market index.

Weyerhaeuser daily chart.
Weyerhaeuser daily chart.

Source: bar chart

The chart shows that WY shares settled at $41.18 at the end of 2021. At $38.94 on June 6, shares were down 5.3% this year.

Earnings and dividends support WY stocks

At $38.94, WY’s market cap was $28.99 billion. The stock averages more than 4.735 million shares each day. WY pays its shareholders a dividend of $0.72, which translates to a yield of 1.85%.

Source: Yahoo Finance

WY analysts’ earnings forecast for the last three out of four quarters. The company’s EPS in the first quarter of 2022 was $1.31 and the market expects WY to gain $0.97 in the second quarter.

Revenues and profits of WY.

Source: Yahoo Finance

As the chart shows, the revenue and profit trend is generally higher.

A survey of nine analysts on Investing.com has a 12-month average price target of $45.22 per share for the stock, with forecasts ranging from $40 to $50.

Consensus of WY analysts

Chart: Investing.com

At the $38.94 level, WY shares are below the lower end of the expected range.

Levels to Watch in WY Stocks

As one of the world’s leading timber producers, WY has over 120 years of experience in the timber industry. The stock has outperformed lumber and the overall stock market in 2022, which is a sign of underlying strength in the business itself.

Moreover, WY is a profitable company, paying dividends to its shareholders.

WY monthly chart.

Source: bar chart

From a long-term perspective, the trend for WY stocks has been bullish since the March 2020 low. WY has hit higher highs over the past decade.

Above the February 2022 high of $43.04, the first level of technical resistance is seen at the April 2010 high of $53.69. WY stocks should find support around the $35 level.

Meanwhile, at around $600 per 1,000 board feet, lumber remains above the pre-2018 all-time high. Lumber futures should find support around the $500 level as demand of new homes remains robust despite rising interest rates. Additionally, rebuilding US infrastructure will require a lot of lumber, which should keep supply below critical for all construction projects.

Weyerhaeuser shares could continue to be a safe bet to hold in portfolios during any period of stock market volatility.

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