After the market closed yesterday (July 26th), Plum Creek (PCL) reported its second quarter 2010 earnings of $35 million, or $0.21 per diluted share, on revenues of $258 million.  Neena Mishra, Forisk’s Director of Equity Research, put the results into context:

PCL’s earnings beat Wall Street’s consensus expectation of $0.15 per share and were up from earnings this quarter one year ago of $32 million, or $0.19 per diluted share, on revenues of $272 million.

The results benefitted from improvement in Northern sawlog prices, improved industrial demand for plywood and MDF products (though residential construction demand remains weak) and reduced supplies of MDF due to the Chilean earthquake, as well as from better-than-expected activity in the real estate segment.

The company continued to repurchase shares on pull-backs. During the quarter, it repurchased approximately 1.37 million shares at an average price of $36.37 per share.

Management now expects third quarter income of between $0.20 and $0.25 per share (slightly below analysts’ expectations) and 2010 income to be between $1.35 and $1.50 per share.

Recent housing data has not been encouraging.  As a result, while we remain somewhat cautious on the outlook for the current year, PCL remains attractive in our view for long term investors due to (1) its large, productive and diversified asset base and (2) for its income oriented investors who appreciate PCL’s juicy dividend yield, which will likely increase when the housing market recovers. Moreover, we believe that Weyerhaeuser’s (WY) conversion to a REIT will result in greater, positive investor interest in all timber REITs.*

*This theme will be addressed further during the “Applied Forest Finance” and “Valuing Timber REITs” courses on August 4, 2010 in Atlanta, Georgia