Barclays on U.S. Paper & Forest Products: B.C. Lumber Exports to China Surge in February - Accumulate WY, LPX, PCL, & RYN on Pullbacks
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13 Buy, 8 Hold, 3 Sell
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 8 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays on U.S. Paper & Forest Products: B.C. Lumber Exports to China Surge in February - Accumulate WY, LPX, PCL, & RYN on Pullbacks
Barclays analyst says, "Decline in lumber futures and shares is a buying opportunity for Weyerhaeuser (NYSE: WY), Louisiana-Pacific (NYSE: LPX), Plum Creek Timber (NYSE: PCL), Rayonier Inc (NYSE: RYN). This report highlights why lumber futures corrected 25% in recent weeks, why this is not sustainable, in our view, and why a positive reversal is likely. Meanwhile, the recent correction in shares of WY, LPX, PCL, & RYN is overdone, in our view, and we view weak lumber prices, weak sentiment, and seasonal headwinds as an opportunity to accumulate these names on pullbacks. Yesterday, we learned that B.C. lumber exports to China surged to a 2.8 BB board foot annual run rate in February, up sharply from a 1.9 BB board foot run rate in January and ~2 BB feet for all of 2010."
"We attribute the recent 25% decline in lumber futures to 4 factors: 1) Weak housing starts and sluggish performance from homebuilders; 2) a mid-March report showing sharply lower B.C. lumber exports to China in January (1.9 BB feet in January vs. 3.3 BB feet in December - we now know February exports rose to a rate of 2.8 BB feet) and generally overblown concerns of a China slowdown; 3) reports of Pine Beetles impacting Jack Pine stands in Alberta; and 4) headlines of Alaska looking to modestly boost harvest activity. Chronic weakness in the housing market remains an ongoing risk for wood product markets, but a) we do not believe demand is getting worse, and b) we are getting considerable help from reduced import pressure and increased export volumes of lumber. Net North American export volumes of lumber are near record levels and rising at ~40% per annum."
Barclays analyst says, "Decline in lumber futures and shares is a buying opportunity for Weyerhaeuser (NYSE: WY), Louisiana-Pacific (NYSE: LPX), Plum Creek Timber (NYSE: PCL), Rayonier Inc (NYSE: RYN). This report highlights why lumber futures corrected 25% in recent weeks, why this is not sustainable, in our view, and why a positive reversal is likely. Meanwhile, the recent correction in shares of WY, LPX, PCL, & RYN is overdone, in our view, and we view weak lumber prices, weak sentiment, and seasonal headwinds as an opportunity to accumulate these names on pullbacks. Yesterday, we learned that B.C. lumber exports to China surged to a 2.8 BB board foot annual run rate in February, up sharply from a 1.9 BB board foot run rate in January and ~2 BB feet for all of 2010."
"We attribute the recent 25% decline in lumber futures to 4 factors: 1) Weak housing starts and sluggish performance from homebuilders; 2) a mid-March report showing sharply lower B.C. lumber exports to China in January (1.9 BB feet in January vs. 3.3 BB feet in December - we now know February exports rose to a rate of 2.8 BB feet) and generally overblown concerns of a China slowdown; 3) reports of Pine Beetles impacting Jack Pine stands in Alberta; and 4) headlines of Alaska looking to modestly boost harvest activity. Chronic weakness in the housing market remains an ongoing risk for wood product markets, but a) we do not believe demand is getting worse, and b) we are getting considerable help from reduced import pressure and increased export volumes of lumber. Net North American export volumes of lumber are near record levels and rising at ~40% per annum."
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