On Friday, BMO Capital Markets updated its rating on Potlatch (NASDAQ:PCH), lifting the stock from Market Perform to Outperform, while maintaining a price target of $51.00. The upgrade reflects the firm's view that upcoming changes in export duties on lumber from Canada will likely benefit the company.
The analyst from BMO Capital Markets expressed confidence in Potlatch's financial outlook, citing several factors expected to contribute to the company's improved earnings before interest, taxes, depreciation, and amortization (EBITDA). A key point highlighted was the anticipated rise in lumber prices due to higher export duties on Canadian lumber, which could set a higher cost floor industry-wide.
Potlatch, with all of its lumber capacity located in the United States, stands to gain from these market shifts. The company's unique pricing arrangement, which links Idaho sawlog prices to lumber prices, is uncommon among Timber Real Estate Investment Trusts (REITs) and is seen as a strategic advantage that could lead to better EBITDA performance.
The analyst also noted that Potlatch's valuation is currently attractive, reinforcing the decision to maintain the $51 price target. This valuation perspective suggests that the stock's current price presents a favorable entry point for investors.
Potlatch, a real estate investment trust (REIT), operates in the forestry, wood products, and real estate markets. The company's positioning and business model are now expected to benefit from the international trade dynamics affecting the lumber industry.
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