Earnings call transcript: PotlatchDeltic misses EPS forecasts in Q2 2025

PotlatchDeltic Corp (PCH) reported mixed Q2 2025 results, missing EPS forecasts by 25% with $0.09 but exceeding revenue expectations by 4.92% at $275 million. Despite a significant decline in Wood Products EBITDA due to one-time operational issues and lower lumber prices, the stock rose 2.81% post-announcement, signaling investor optimism driven by record lumber shipments and a strong Q3 outlook. The company anticipates a substantial increase in Q3 EBITDA, projecting a $50 rise in lumber prices by September due to increased Canadian softwood lumber duties and potential Section 232 tariffs, while also undertaking its largest share repurchase volume since becoming a REIT, reflecting confidence in its undervalued stock and future performance.

Analysis

PotlatchDeltic Corp. (PCH) presented a mixed second-quarter 2025 financial report, characterized by an earnings per share of $0.09, which missed analyst forecasts by 25%, but was counterbalanced by revenue of $275 million, surpassing expectations by 4.92%. Despite the earnings miss, the stock price increased by 2.81%, indicating that investors are prioritizing the company's strong top-line performance and bullish forward guidance. The primary drag on profitability was the Wood Products segment, where adjusted EBITDA plummeted to $2 million from $12 million in the prior quarter, impacted by lower lumber prices and approximately $7 million in one-time operational costs and a $3 million inventory impairment. However, the company demonstrated operational resilience with record lumber shipments, which rose 13% to 303 million board feet, and stability in its Real Estate segment EBITDA ($23 million). Management has projected a significant recovery in Q3, forecasting another record for lumber shipments (310-320 million board feet) and a $50 rise in lumber prices by September, driven by higher Canadian duties and potential new tariffs. This optimism is further substantiated by an aggressive capital allocation strategy, including the largest quarterly share repurchase ($56 million) since the company became a REIT, signaling strong management confidence in the stock's current valuation relative to its net asset value, all while maintaining a robust liquidity position of $395 million.

Key Decisions for Investors

• Investors should look past the Q2 EPS miss and focus on the strong forward guidance, particularly the anticipated significant increase in Q3 EBITDA, which is predicated on a recovery in lumber prices and the resolution of one-time operational issues.
• Management's record-setting $56 million share repurchase at an average price of $39 per share serves as a strong signal of perceived undervaluation, suggesting that current price levels may offer an attractive entry point aligned with the company's internal valuation.
• The bullish thesis is heavily dependent on external factors; therefore, it is critical to monitor the trajectory of lumber prices, the final impact of Canadian softwood duties, and any definitive news on potential U.S. Section 232 tariffs.
• Closely track the Q3 performance of the Wood Products segment for a confirmed rebound in profitability, as this would validate management's assertion that the severe Q2 challenges were temporary and that operational efficiency is improving.