This lumber company reported fourth quarter earnings of $366 million on sales of $1.689 billion, and recently completed its acquisition of Norbord, Inc.
West Fraser Timber Co. Ltd. (WFG)
From Positive Patterns
I think there is money to be made in lumber stocks, and I believe Western Fraser Group has the best upside leverage for earnings gains. The stock is cheap and should make for a good trade. It is very cyclical and the next 2-4 years should be good. It’s best for an IRA.
WFG produces and sells all sorts of lumber, pulp, paper products, and medium-density fiberboard (MDF) panels that come from mostly Spruce Pine and Douglas Fir. The company makes a lot of paper/ended product that ends up being tissues/toilet paper and paper for print.
WFG operates in the USA in a significant way in the southern part of the country with southern yellow pine lumber (which is very profitable for WFG right now because there is too much soft-pine coming to market).
With locations on the West Coast in Vancouver, Asia is a significant (and growing) customer, and having lots of product right there at the Port of Vancouver is a big deal, for sure.
Home-building is on the upswing. The real estate market is low on inventory—new or used—and the Asian economy is quickly picking up. These are two important factors that point to higher earnings potential for WFG.
This is still a cheap stock, selling for about six times cash flow and less than eight times this year’s earnings estimates. Zacks estimate is for $9.50 this year. Below $70, this is a cheap stock and a good trade for an IRA.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, March 5, 2021