Goldman Sachs Neutral On Plum Creek Timber (PCL)

Goldman Sachs has a Neutral rating and a $42 price target on shares of Plum Creek Timber Co. Inc. PCL. In a note to investors, Goldman writes, "PCL stated that there was no change to their 2011 financial outlook—PCL expects 2011 EPS to be $1.25-$1.45, which reflects real estate sales of $250-$300 mn. Our 2011-2013 EPS estimates are unchanged. On near-term market trends, PCL noted favorable sawlog pricing in the northwest, weaker sawlog pricing in the US south, and relatively stable pulpwood prices. Long-term (10 year period), PCL believes EBITDA is well positioned for solid growth driven by: (1) increased harvest levels, (2) improved mix (more sawlogs vs. pulpwood), (3) higher sawlog prices driven by increased demand and less Canadian lumber supply, and (4) higher pulpwood prices in the US south driven by biomass demand. PCL expects stronger cash flows off its timberlands and improving real-estate values has the potential to boost the value of its 6.8 mn acres. We rate PCL shares Neutral as we prefer exposure to containerboard and pulp, where we see more favorable near-term fundamentals relative to timber and building products." Shares of PCL closed at $42.13, a loss of 85 cents or almost 2% yesterday.