PCH - PotlatchDeltic cut to Sector Perform at RBC as YTD rally limits upside

2023-07-19 11:11:24 ET

PotlatchDeltic ( NASDAQ: PCH ) stock dipped 2.3% in Wednesday morning trading after RBC Capital Markets downgraded the timber REIT to Sector Perform from Outperform as its more than 20% rally year-to-date limits further upside.

Analyst Paul Quinn attributed the price appreciation -- and outperformance vs. peers -- to the company's wood products business and "leverage to lumber prices through its indexed Idaho sawlogs."

The downgrade also comes as PotlatchDeltic ( PCH ) did not buy back any shares in Q1, despite having around $150M remaining on its authorization.

"While lumber prices have increased since the end of Q1, providing more potential cash flow to allocate to share repurchases, we note that the share price has also pushed higher, and therefore increased repurchase activity may run counter to management's statement that it intends to be opportunistic," Quinn wrote in a note.

The Sector Perform rate diverges from the SA Quant system rating and the average sell-side analyst rating, both at Buy.

In June, PotlatchDeltic ( PCH ) CEO Eric Cremers contended that residential construction in the U.S. will only get stronger as the country remains "way underbuilt," a move that would bode well for the lumber market.

More on PotlatchDeltic:

• PotlatchDeltic: Cash Flow Dries Up As Lumber Prices Tank
• PotlatchDeltic: Hold For Short Run, Buy For Long Term

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