PotlatchDeltic (PCH) Completes Merger With CatchMark and Stocks – September 15, 2022

PotlatchDeltic Corporation (PCH Free Report) announced its merger with CatchMark Timber Trust, Inc., in an all-stock transaction. PCH edged up 0.4% on September 14, after the press release.

Under the terms of the agreement, each outstanding share of CatchMark common stock (immediately prior to the merger) was converted into 0.23 PCH common stock. Approximately 11.5 million shares of PotlatchDeltic common stock will be issued to CatchMark shareholders, representing approximately 14% of PCH’s total outstanding shares.

Eric Cremers, President and CEO of PCH, said, “The completion of the CatchMark merger diversifies our timber ownership into some of the strongest markets in the southern United States. The work of integrating the two companies and achieving our synergy goal begins immediately. We are excited to leverage the financial and strategic benefits of the transaction to continue to build shareholder value over the long term. »

The merger brought together two successful and complementary Timberland REITs. PotlatchDeltic will now own nearly 2.2 million acres of diversified forest land, 626,000 acres in Idaho and more than 1.5 million acres in the southern markets of the United States.

Price movement

Over the past year, PotlatchDeltic and other industry players like Louisiana-Pacific Corporation (LPX free report), Weyerhaeuser Company (Wyoming free report) and Boise Cascade Company (Bcc Free Report) are struggling with higher raw material and energy costs, which are significant components of our operating costs. These costs fluctuate depending on certain macroeconomic factors such as changes in demand, disruptions in the supply chain and inflation or deflation.

Image source: Zacks Investment Research

The recent decision will help PotlatchDeltic waive those costs and improve its profitability. All four stocks have underperformed the Zacks Building Products – Wood industry over the past three months. Encouragingly, PCH gained 0.2% during the said period, better than LPX, WY and BCC, which were down 1.7%, 3.4% and 8.1% respectively.

We believe PotlatchDeltic’s Timberlands and Wood Products businesses are benefiting from soaring lumber prices. Rising demand for PCH products, driven by positive housing fundamentals and continued increases in lumber prices, should fuel growth.

Zacks Rank

Currently, PCH carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A brief overview of other actions

Louisiana-Pacific or LP is a leading manufacturer of quality and durable engineered wood building materials, framing products and exterior siding. This Zacks Tier 3 stock benefited from strong demand from the US residential market and repair and renovation (R&R) business. The company’s strategic transformation, effective cash management and inorganic moves will likely boost its future performance.

The Zacks consensus estimate for LPX earnings in 2022 rose to $12.99 per share from $13.93 over the past 60 days.

Weyerhaeuser is one of America’s leading forest products companies. This Zacks Tier 1 stock has benefited from strong new home construction activity, which in turn is leading to improved demand. Additionally, its focus on operational excellence has paid off over time.

The Zacks consensus estimate for WY’s earnings in 2022 rose to $3.14 per share from $3.05 over the past 60 days.

Boise, ID-based Boise Cascade – which manufactures wood products and distributes building materials in the United States and Canada – is aided by favorable commodity wood products, pricing and robust construction activity.

Boise Cascade currently carries a No. 2 Zacks rank. Earnings estimates for 2022 have moved north to $20.06 per share from $18.17 in the past 60 days.