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080128 Deutsche Bank Report - Plum Creeik's 4Q in 100 Words

Deutsche Bank - Equity Research

Plum Creek {Ticker: PCL, Closing Price: USD 43.39, Target Price: USD 44.00, Recommendation: Hold}.

* About in-line. Reported $0.68/share, but net of a $0.25 gain on sale of non-strategic timberland, looks like $0.43. DB & FC @ $0.42. Comps: 3Q07 = $0.36, 4Q06 = $0.32. Pos: $705/acre on 100K acres of non-strategic WI timberland = solid price. Neg: softwood sawlog prices dropping a bit more than anticipated.

* Northern resources : EBIT: $17MM, 3Q07 = $8MM, 4Q06 = $24MM. 3Q was impacted $8MM by fire damage and deferral of harvests due to fire danger. Sawlog prices down 6% q/q (11% in OR).

* Southern resources : EBIT: $35MM, 3Q07 = $39MM, 4Q06 = $42MM. Harvest down 15% q/q, due to deferral of 200K tons of sawlogs. Sawlog prices down 3% q/q, largely on mix. Pulpwood prices up 22% y/y (flat to up slightly q/q).

* Real estate : EBIT: $78MM, 3Q07 = $47MM, 4Q06 = $35MM. Result excludes a $43MM gain on sale of WI timberland. Per-acre values mostly a bit weaker than recent quarters, but PCL pointing to mix and suggesting per/acre values remaining strong. $1,510/acre on sale of 17K acres of small, non-strategic timberland = impressive.

* Annual guidance : Guiding '08 to $1.15-1.40, versus DB & FC @ $1.40. Estimates will come down a bit toward middle of range. Are we bothered? Not really. Long-term asset value not going anywhere, and better to be too cautious in this cyclical downturn than too aggressive.

* Change in view? No. Asset value is impressive, and management continues to execute well during this downturn, but cyclical weakness is likely to persist for several quarters. No change to Hold rating and $44 price target. Trimming estimates slightly: '08 goes from $1.40 to $1.30 (1Q = $0.29) and '09 goes from $1.60 to $1.50.