Profits for Wood-Product Makers to Soar on Paper
Kiesche, Elizabeth, THE JOURNAL RECORD
U.S. forest-product companies will profit from soaring paper prices in the second quarter, though earnings from the wood- and lumber-products business will be whittled away by waning construction activity.
The paper industry's four-quarter-old resurgence, which followed five years of declining demand for paper products, may mark the high point for its earnings growth, said Evadna Lynn, an analyst at Dean Witter Reynolds.
"The second quarter is likely to be the peak quarter," she said. On average, Lynn said she expects forest-products companies' earnings to quintuple from year-ago levels.
Even if profits continue to climb in coming quarters, "the second quarter will be the last of the very easy earnings comparisons," said Mark Diverio, an analyst at UBS Securities. "Since the paper industry started recovering in the third quarter of last year, the comparisons will get tougher."
Boise Cascade, for example, is expected to earn $1.34 a share, based on the average estimate of 14 analysts polled by Zacks Investment Research. That compares with a year-ago loss of 86 cents.
Plain white paper, in particular, is benefiting from continued strong demand and higher prices. Prices for uncoated free sheet, the kind of paper used in photocopying machines and laser printers, rose 11 percent to an average second quarter price of $1,125 a ton, said Sherman Chao, a forest-products analyst at Merrill Lynch Co.
Boise Cascade Corp., Champion International Corp. and Bowater Inc. are the most likely to exceed analysts' estimates because of their large operations to supply paper for computer printers and plain-paper fax machines, Diverio said.
Newsprint prices also will contribute to the earnings of those three companies, he said. …