Rayonier Inc. RYN enjoys a solid timberland portfolio in some of the most productive timber-growing regions of the U.S. South, the Pacific Northwest and New Zealand. Although competition from industry peers remains a concern, its focus on unlocking the long-term value of its higher-and-better-use (HBU) development and rural property portfolio bodes well for growth. 

Rayonier is poised to benefit from the developments in the field of biogenetics and cloning that have led to faster growth in trees. Also, its balance sheet strengthening moves are likely to pay off in the long run. 

Last week, Rayonier reported a fourth-quarter 2024 pro-forma net income per share of 27 cents, beating the Zacks Consensus Estimate of 19 cents. The reported figure compared favorably with the prior-year quarter’s 17 cents. The company’s Southern Timber, New Zealand Timber and Real Estate segments displayed solid results. However, weakness in the Pacific Northwest Timber and Trading segments was noticed.

According to Mark McHugh, president and CEO of Rayonier, “Our full-year 2024 financial performance demonstrates our resilience and nimble execution amid persistent market headwinds.”

Although over the past month, RYN shares have declined 1.3% compared to the industry's upside of 4.7%, analysts seem bullish on this Zacks Rank #1 (Strong Buy) company. The Zacks Consensus Estimate for the company’s 2025 earnings per share indicates a favorable outlook as it has been revised a cent upward in the past two months to 53 cents. This also suggests a 12.8% increase year over year.

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Factors That Make Rayonier a Solid Pick

Geographical Diversity & Favorable Demand-Supply Dynamics: Rayonier has emerged as the leading “Pure Play” timber REIT. As of Dec. 31, 2024, its portfolio included 1.75 million acres in the U.S. South, 308,000 acres in the U.S. Pacific Northwest and 412,000 gross acres in New Zealand. Over the past several years, lumber production and capacity in the U.S. South have grown considerably. With roughly 71% of Rayonier’s Southern timberlands located in the top quartile markets, the company is well-poised to benefit from the favorable trend.

HBU Development: Rayonier constantly strives to find alternative uses of the timberlands for higher and better use (HBU). There are many attractive HBU opportunities across the U.S. South, mainly in the Florida and Georgia coastal corridor. It has two unique HBU land portfolios: the Wildlight development project, north of Jacksonville, FL, and the Heartwood development project, south of Savannah, GA, which provide long-term development opportunities. 

The company remains focused on unlocking the long-term value of its HBU development and rural property portfolio in its Real Estate segment. The company is encouraged by the continued strong demand and value realizations for HBU properties. Its current pipeline expects another solid year for both its rural land sales program and its improved development projects.

Development in Biogenetics & Cloning: This Timberland REIT’s business has significantly benefited from the developments in the field of biogenetics and cloning, which have led to faster growth in trees, ensuring proper sizes for maximum extraction of wood. 

Balance Sheet Strength: Rayonier’s measures in recent quarters have significantly strengthened its balance sheet, bolstered its liquidity position and helped fund acquisitions. In November 2023, Rayonier announced an asset disposition and capital structure realignment plan, targeting $1 billion of select asset sales over the following 18 months. This plan is aimed to return capital to share and unit holders and maintain net debt to adjusted EBITDA within 3.0X compared with 4.5X targeted earlier. 

Since introducing this initiative through Dec. 31, 2024, the company has completed large dispositions totaling $737 million, returned more than $110 million of capital to shareholders in the form of special cash dividends and share repurchases, and reduced net debt to 2024 adjusted EBITDA to 2.6X. The company exited the fourth quarter of 2024 with $323.2 million of cash and cash equivalents. In the same period, its weighted average cost of debt was approximately 2.7%. The weighted average maturity of its debt portfolio was approximately four years, with no significant debt maturities until 2026.

Other Stocks to Consider

Some other top-ranked stocks from the broader REIT sector are Welltower Inc. WELL and SL Green Realty Corp. SLG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has moved three cents upward in the past week to $4.82.

The consensus estimate for SL Green Realty’s 2025 FFO per share has increased a cent in the past month to $5.52.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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