Forest product prices on the rise....
Forest-product shares rise, led by
Georgia-Pacific
NEW YORK, Feb 24 (Reuters) - Shares of U.S. forest and paper companies rose on
Wednesday after strong demand for wood products led two analysts to raise their profit estimates
on the No. 2 U.S. paper company, Georgia-Pacific Corp. (NYSE:GP - news).
''Demand for wood products is clearly stronger than any of us thought,'' said Matt Berler, an
analyst at Morgan Stanley Dean Witter.
Berler raised his first-quarter earnings estimates for Atlanta-based Georgia Pacific to $0.40 a
share from $0.20 and his full-year estimates from $1.50 to $1.30.
''The strength in U.S. housing starts is catching everyone off guard -- just witness the 1.8 million
housing-start number that was reported last week. As long as the trend lasts, it's going to generate
upside surprises for Georgia Pacific and other wood-product companies,'' Berler said.
The analyst added that gypsum and panel products were among the strongest beneficiaries of the
robust market because of limited excess production capacity.
In afternoon trading on the New York Stock Exchange, Georgia-Pacific -- the sector's bellwether
-- was 3-1/4 higher at 71-5/8. Shares of Weyerhaeuser Co. (NYSE:WY - news), a big paper
and forest products producer based in Washington state, added 9/16 to 54-5/8. International
Paper Inc. (NYSE:IP - news), the world's largest paper and forest company, was up 9/16 at
43-5/8.
''Wood prices are holding up and improving, while volume is coming through,'' said Linda
Lieberman, an analyst for Bear Stearns & Co.
Lieberman also raised her quarterly profit estimates for Georgia Pacific to $0.40 from $0.20 a
share and her full-year estimates to $1.90 from $1.50 a share.
''With four million shares outstanding, GP has the operating leverage and can bring investors to the
bottom line faster than any other wood company,'' Lieberman said.
Berler had raised his estimates at the start of the year and again after GP's announced its earnings
at the end on January. He said the strong housing market was forcing analysts and investors to
throw out cyclical strategies.
''We have all been schooled to think the general tendency in these markets is that things will get
weak when the market is strong, and vice versa,'' Berler said. ''But in 1999, housing starts have
gone from strong to stronger, and there is no end in sight.''
Berler expects the trend to continue until either the U.S. economy slows enough to boost
unemployment significantly or interest rates rise sharply.
''But I don't see that happening any time soon,'' he said.
(Note: this article is ''in progress''; there will likely be an update soon.)
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