RE:This coming years will be interesting. Great post Dosperros.
When you say in tough times earnings could be only 1B (I assume that’s CAD based on your math), is that in Q3, or next 12 months or calendar year 2022?
For my part, I think Q3 will look a lot like Q1 with around 655M USD earnings / 7 USD EPS
Q1 will probably end up with better average benchmark pricing than Q3 but Q1 also didn't include 1 month of Norbord results, had storm delays/shutdowns, had 1 time accounting/merger costs, more interest payments on 2+B debt at the time.
I think for those reasons Q3 and Q1 earnings will be close and maybe even higher EPS in Q3 as share count is way down compared to Q1. Maybe I am over estimating Q3 but that’s my guess for now.
I think the advantage going forward is that WFG has made amazing strides in the last 6 months which will allow future cash flows to go to shareholders via buybacks or dividends.
In the last 6 months WFG has reduced total long-term debt from over 2B to 500M. I think its good to keep some debt and show you can manage it so I don't see them reducing debt anymore but even they do they can’t reduce more than 500M because that’s all that’s left! WFG also reduced share count from 123M to 105M in the same last 6 months while increasing the dividend by 25%.
They just made a huge acquisition so I don't see them doing another but you never know… we can hope.
WFG had $2.2B USD cash on hand as of June 30 (minus 800m USD for SIB) plus whatever amount they earn in Q3 which I am guessing is not far off 800M USD. So maybe they exit Q3 with ~2B USD cash on hand... and the only place that can really go is more buybacks and future dividend increases/payouts.
Going forward if they only earn as little as 500M USD per quarter that’s still 20% of the market cap which would be cause to celebrate for any other company.
If we get into another situation next year at the start of building season (like this Q2 when prices went through the roof or even get above 1000 for awhile), and WFG generates 1.5B USD earnings in 1 quarter again (or even 1B)…. with no debt to repay or BAM selling to hold share price back and 20% less shares outstanding compared to Q2 this year… that would be something to see for the share price. I don’t think it’s too far-fetched ether that benchmark prices could get up above 800-1000 again next Spring.
I’d be interested to know what you think and others also for what Q3 numbers and long-term outlook could be.