WY Weyerhaeuser
Cheaper now, but trough margins and capex-heavy AFFO still don't justify 15x FFO.
The story
Weyerhaeuser owns about 10.4M acres of US timberland plus a cyclical wood products mill business, so its cash flow depends on lumber and OSB prices and on US housing starts. Revenue has fallen from 10.18B to 6.91B and operating margin from 25.3% to 7.7%, with no bottom yet. The balance sheet is investment grade, but high mortgage rates keep housing starts low. Capex of 0.99B roughly equals FFO of 0.98B, so free cash flow after reinvestment is thin.
Revenue and margins fell again, so I keep Y1 growth at -2% and terminal growth at 2%, well below the 5.18% risk-free rate. I raised the AFFO ratio slightly, from 0.60 to 0.62, because some capex is discretionary mill and growth spend rather than recurring reforestation. Even so, total capex matching FFO rules out anything near the usual 0.70-0.90 range. I cut beta from 1.30 to 1.25 to lean toward the 0.9 industry anchor, but it stays high because WY is tied to the lumber and housing cycle. The price fell 23% to 20.01, which narrows the gap to my value. The market still pays about 15x trough FFO, so it is paying for a housing recovery plus land optionality, such as the geothermal and carbon deals.
Value drivers
| AFFO growth (Y1) | -2.0% |
| Terminal AFFO growth | 2.0% |
| AFFO / FFO ratio | 62.0% |
| Beta | 1.25 |
| Failure probability | 1.0% |
| Cost of equity | 10.8% |
Valuation bridge
| PV of AFFO (explicit) | 3.48B |
| PV of terminal value | 2.52B |
| Equity value | 5.94B |
| ÷ shares → per share | $8.25 |
News
neutral -0.15 · 8 articles
- Are Interest Rates and Seasonality Pushing Lumber Futures Prices Lower?
- Weyerhaeuser (WY) Could Benefit From Its Timberland Base and a U.S. Housing Rebound
- Is Weyerhaeuser Stock Underperforming the S&P 500?
- Hexagon, Weyerhaeuser Ink Geothermal Development Deal for Pacific Northwest
- Weyerhaeuser (WY) Could Be 18% Undervalued On Its Latest Earnings Beat
- Weyerhaeuser (WY) Stock Looks Cheap On Cash Flow But Pricey On Earnings
- Weyerhaeuser (WY) Q2 2026 Earnings Call Transcript
- WY Q2 Beat Shows a Lumber Rebound but Higher OSB Costs Cloud Outlook
Projected AFFO
| Yr | FFO | AFFO | Growth | PV |
|---|---|---|---|---|
| 1 | 962.36M | 596.66M | -2.0% | 538.46M |
| 2 | 947.39M | 587.38M | -1.6% | 478.38M |
| 3 | 936.86M | 580.86M | -1.1% | 426.92M |
| 4 | 930.62M | 576.98M | -0.7% | 382.70M |
| 5 | 928.55M | 575.70M | -0.2% | 344.61M |
| 6 | 930.61M | 576.98M | 0.2% | 311.68M |
| 7 | 936.82M | 580.83M | 0.7% | 283.15M |
| 8 | 947.23M | 587.28M | 1.1% | 258.37M |
| 9 | 961.96M | 596.42M | 1.6% | 236.80M |
| 10 | 981.20M | 608.34M | 2.0% | 217.97M |
Key risks
- Mortgage rates stay high, keeping housing starts and lumber prices depressed
- Wood products margins keep falling toward zero, while capex continues to absorb FFO
- Dividend cuts or supplemental payouts being dropped if cash flow does not recover
Catalysts
- Fed rate cuts spark a rebound in US single-family starts and a spike in lumber prices
- Money made from timberland land (geothermal, carbon capture, solar leases, sales of higher-and-better-use land) re-rates the land value