Lumber producer Weyerhaeuser (NYSE: WY) could benefit from America’s need for more affordable housing.
The timber company has continued its acquisition strategy by investing $459 million in timberland in Washington, North Carolina, and Virginia during the third quarter.
Weyerhaeuser does not just own the largest amount of timberland in North America privately. The company also owns and operates 33 plants to manufacture various wood products, including ones that are used to build homes. But lumber prices have fallen as demand has declined, since consumers are waiting for lower mortgage and interest rates before they buy a home or make renovations.
The company reported net earnings of $80 million during the third quarter on net sales of $1.7 billion, compared to net earnings of $28 million on net sales of $1.7 billion for the same period last year.
Weyerhaeuser also generated income through the sales of its Princeton lumber mill in British Columbia for $85 million and advanced three divestiture packages of non-core timberlands – two of which were closed or under contract in early October, totaling $410 million of expected cash proceeds by the end of 2025. The company anticipates the third divestiture to close in early 2026, with total proceeds from all divestitures expected to exceed the cash outlay required for its recently completed acquisitions.
JPMorgan reduced its price target very slightly to $27 from $28 but kept its overweight rating on the stock.
The U.S. needs more housing
Housing demands in the future will boost Weyerhaeuser’s revenue, especially consumers seeking to buy new homes. Potential buyers have refrained from purchasing homes due to higher mortgage rates.
A decline in housing construction has led to a steep drop in the price of lumber, declining 20% in 2025 to a current rate of $550 per 1,000 board feet. The shares, now around $21.50, have lost half their value since peaking in 2022, and trade where they did in the late 1990s.
The pressure on lumber prices has impacted the outlook of Weyerhaeuser’s shares.
The stock has tumbled by 20% year-to-date, but the decline shrank to 1.8% during the past month.
Pent-up demand from both first-time buyers and current homeowners seeking to upgrade to a larger house will be beneficial to Weyerhaeuser since its products are used in home construction. Homeowners have also refrained from conducting renovations in their homes, but that trend could change soon as interest rates have declined this year. The Federal Reserve has lowered rates twice so far in 2025 and could make additional cuts.
Home builders will ramp up construction to fill the backlog for consumers seeking new homes when inflation declines, the economy appears stronger, and shoppers feel more confident about their jobs and the cost of groceries and other items. Lumber prices typically rise when demand increases, which will boost confidence in the company’s shares.
The sector has potential in the future. Buck Horne, a Raymond James analyst, said he is “constructive” on the industry because of historic valuation discounts.
The company, founded in 1900, owns or operates about 10.4 million acres of timberland in the U.S. and also manages more tracts of timberland in Canada.
Weyerhaeuser has also adapted to a slower economy and made some cuts in its operations to lower its expenses.
CEO Devin Stockfish said the company’s focus has been working to “align our strategy with the cyclicality of the business. As a result, Weyerhaeuser is a much stronger company today than at any point in recent history,” during the third quarter conference call.
RBC Capital Markets analyst Matthew McKellar remains bullish on the company, giving it a price target of close to $39 a share and believes there is a “somewhat positive risk/reward skew into the event,” which is Weyerhaeuser’s investor day on Dec. 11.
A 125-year-old company, Weyerhaeuser, plans for the future by planting 100 million new trees annually and only cuts down 2% of its forests each year. Consumers have been waiting on the sidelines to upgrade their flooring, replace their aging bathroom’s and add new appliances. When the renovation and home construction markets return to their previous levels, the prices for lumber will rise again and could rise to the $1,000 per 1,000 board feet levels reached in 2021 and 2022 again. Patient investors are likely to benefit when lumber prices rebound and top the $1,000 level.
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