Key Morningstar Metrics for West Fraser Timber
- : C$116.00Fair Value Estimate
- : ★★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of West Fraser Timber’s Earnings
West Fraser Timber WFG reported second-quarter sales of USD 1.43 billion, a year-over-year decline of 6.4%. The company reported adjusted diluted earnings per share of negative USD 0.78, down from negative USD 0.38 in the same period last year.
Why it matters: Despite improving lumber prices and better production, adjusted EBITDA fell 30% year over year to USD 59 million. Lumber sales only grew 2.2% year over year this quarter due to management closing sawmills in late 2025.
- Gross margins only improved by 160 basis points year over year, suggesting that efforts on improving production and operational efficiencies are not finished. The North American EWP and pulp & paper segments saw year-over-year double-digit revenue declines, but Europe EWP rose 11.5%.
- We expect the transition to steady profitability to be challenged by lower consumer confidence and higher mortgage rates in the near term.
The bottom line: We are increasing our fair value estimate for no-moat West Fraser stock to C$116 per share from C$110, mostly due to a change in our cost of capital methodology lowering our weighted average cost of capital by 30 basis points to 10.3%.
- We believe it will take time for management to continue its portfolio evaluation and optimization efforts. Closing high-cost sawmills has temporarily dampened production figures this quarter amid improving lumber prices.
- Although we currently rate the stock at 4 stars, we think West Fraser shares will remain depressed for some time due to near-term operational challenges and macroeconomic uncertainty.
