Western Forest Products (WEF) has had a rough time for the last 2 to 3 years.In March of 2020 it hit a low of $.61 and even in August of 2020 it traded only at $1.20.Lumber prices had been trading around $250-$500 per 1000 boardfeet. But in the summer of 2020 the lumber cycle reversed and prices climbed to a high of $1500 per Mbdft.The revenues for Q1 and Q2 of 2021 were at record highs.With the wait in delivery times and bills being paid a considerable amount of June Q2's high prices will be reflected in Q3 not Q2.But then the price dropped to the $500 per Mbdft. area and only now is recovering to the $750 area.
Recap of Q2 Highlights
Q1 revenues and earnings were well above the rate seen in Q1 2020.A traditional level of earnings would have been $.03-$.05 in the 2018-2020 period.But in Q1 2021 WEF produced $.14 per share.This helped to move the almost stagnant stock price.And WEF reported e.p.s. of $.21 in Q2.So in Q2 the stock price moved up to the $2.00 level after reporting e.p.s. of $.09 per share in Q4 2020 and $.14 in Q1 2021.And in Q2 WEF started to divest all it's non-core assets like partnerships with indigenous people and a stone quarry.This money came to about $45 million and Western used it to pay off debt.Now it's debt/equity ratio is a reasonable 12%.However as the lumber price came down in Q3 WEF retreated to it's former level around $2.00.Now it awaits Q3 results but investors have bid the stock price up to the $2.35 level.This blog believes that investors will be rewarded as e.p.s. should be in a range from $.11-$.15 per share.Scotiabank foreacsts annual e.p.s. of $.47 for WEF in 2021.This blog expects $.51-$.55 per share .Because of the cyclical nature of lumber stocks their P/E/ ratio tends to be lower than the TSX average.But with a P/E ratio of 6 times investors should expect the stock price to move towards $3.00-$3.25 by December.Now WEF shareholders only have to wait until November3 to see Q3 results. 
Dale Mcintyre M.SC is a freelance writer working with Zacks Research.
Dale Mcintyre M.SC is a freelance writer working with Zacks Research.Keeping up with Interfor and Canfor
Western Forest has made a lot of improvements in the last 18 months.Mostly to clean up it's B.C. coastal operations.Now it's debt has been reduced and it's liquidity is solid.But it has not made acquisitions to bolster it's diversity against another shock from the lumber price cycle. WEF needs to solidify it's supply chain by 2022. Zacks Investment Research: Stock Research, Analysis, & Recommendations MoneySense
