Timber REITs: Timberland holds its value in uncertain times

Real Estate

ERA Research

Timber REITs remain undervalued despite trade policy turmoil, expectations for flat US housing starts and falling consumer confidence. Tailwinds for the year ahead include steady timberland valuations and strong comp sales data, continuing investor interest in US timberland and carbon solutions, and potential increased US wood products manufacturing due to escalating duties (and possible tariffs) on Canadian imports. ERA rates all 3 REITs Outperform, valuing them using a NAV method for land assets and a market-based approach for manufacturing assets. Rayonier and Weyerhaeuser both have target prices of $36, offering ~30% upside, while PotlatchDeltic's TP of $50, offers 25% upside.

- 18 April, 2025

OSB prices moving higher again, further increases expected

ERA Research

After posting modest declines earlier this year, OSB prices have rebounded from the mid-February low of $411 to $439 (chart 1). At the same time, indicators show US structural panel dealers’ sales-to-inventory ratios are moving higher (chart 2). The ERA team suspect that many OSB buyers delayed wholesale inventory replenishment when it looked like prices were set to roll over this quarter. However, when prices abruptly reversed, they were forced to pull out of their PO books, leaving OSB producers in the seat once again. In the near term, further OSB price increases seem assured and whilst the team sees risk of oversupply for OSB in H2/2024, their outlook has become less negative. Trade recommendations are more focused on the next US housing upcycle as opposed to a seasonal trade around spring building. Over the longer-term, the team sees most upside for TSX:Interfor ($26 target price) and NYSE:Weyerhaeuser ($39 target price).

- 08 March, 2024

Building an all-weather environmental strategy

Sustainable Market Strategies

Rising interest rates were detrimental to renewable energy stocks in 2023, underscoring that using solely renewable energy plays as short hand for climate change investing is myopic and risky. The consequences of climate change go far beyond a low-carbon energy transition and the associated investment opportunities (and risks) are equally numerous and varied; building an environmental portfolio requires careful consideration of the macro backdrop. In the current macro context, the Sustainable Market Strategies team find US plays particularly compelling. Newly listed Veralto Corp, Owens Corning and Weyerhaeuser are three companies that should do well next year and are tackling three distinct environmental problems.

- 08 December, 2023

Russian log and lumber export changes to impact China suppliers in 2022

ERA Research

Russia confirms it will implement a ban on softwood and high-value hardwood log exports from January 1st, 2022 - this will have a meaningful impact on global markets, particularly China, given that China remains heavily leveraged to solid-wood imports from Russia. Analysts at ERA explain why they believe US log exporters will be the biggest beneficiaries, highlighting the potential for price and volume gains for both Rayonier and Weyerhaeuser next year.

- 10 December, 2021