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What is in Store for Rayonier's (RYN) Q1 Earnings?

Real estate investment trust (“REIT”) Rayonier Inc. RYN is expected to report first-quarter 2016 results on May 4, 2016, after the market closes.

The company reported a positive earnings surprise of 28.57% in the preceding quarter, and an average beat of 20.78% for the trailing four quarters. The Zacks Consensus estimate for first-quarter earnings is currently pegged at 8 cents.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Rayonier owns or leases a 2.7 million acres of timberland in some of the most productive timber-growing regions of the U.S. and New Zealand. Importantly, the timberlands are strategically located near the pulpwood consuming mills which manufacture products for the growing end-markets. In addition, a rising demand from pellet manufacturers, mainly in Texas and Georgia, is aiding the REIT. All these should have positive impact on first-quarter 2016 results.

Also, the company enjoys favorable demand-supply dynamics and is, therefore, able to enjoy better pricing power. Further, the company aims at enhancing its timberland base through disciplined acquisition.

However, similar to other timberland REITs, Rayonier’s business is governed by rules of the federal and state forestry commissions. In other words, Rayonier has to comply with stricter regulatory requirements compared with other industries. Further, higher degree of volatility in timber prices and seasonality associated with forest products industry continue to pose headwinds before the company.

Moreover, Rayonier faces cut-throat competition from national and local players regarding a number of factors, including quality and price. Also, wood products, in general, are encountering increasing rivalry from a variety of substitutes like non-wood and engineered wood products.

Earnings Whispers

Our proven model does not conclusively show that Rayonier will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at 8 cents, which translates into an Earnings ESP of 0.00%.

Zacks Rank: Rayonier’s Zacks Rank #3, when combined with a 0.00% Earnings ESP, makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks in the REIT sector you may want to consider instead, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

Douglas Emmett Inc DEI has an Earnings ESP of +2.38% and a Zacks Rank #2. The company will report on May 3.

Gramercy Property Trust Inc. GPT has an Earnings ESP of +5.88% and a Zacks Rank #3. The company will release results on May 4.

Federal Realty Investment Trust FRT has an Earnings ESP of +1.46% and a Zacks Rank #3. The company will report first-quarter 2016 results on May 4.

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RAYONIER INC (RYN): Free Stock Analysis Report
 
FED RLTY INV (FRT): Free Stock Analysis Report
 
DOUGLAS EMMETT (DEI): Free Stock Analysis Report
 
GRAMERCY PPT TR (GPT): Free Stock Analysis Report
 
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