Plum Creek Timber Co. (PCL) - Bear of the Day

We are changing our long-term recommendation for Plum Creek Timber (PCL) from Neutral to Underperform as we anticipate it to perform well below the broader market.

In the last 30 days, fiscal earnings estimates have been lowered by nearly all analysts covering the stock, driven by the cyclical nature of the business, cut-throat competition, and strict environment policies. However, Plum Creek is the largest publicly-held timber REIT, with a diversified timber and land base that enables it to benefit from large economies of scale.

The stock, however, is trading at a premium to the peer group based on forward earnings estimates. Our target price of $34.00, 25.6X 2010 EPS, reflects our belief that PCL will perform well below the broader market.
 
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