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LOS ANGELES (AP) — Shares of timberland owners Plum Creek Timber Co. Inc. and Weyerhaeuser Co. traded higher on Monday, after an analyst said a proposed sale of 1.9 million acres of timberland is a positive for the two companies.
Hancock Timber and Molpus Woodlands announced last week that they would buy the land from Forest Capital Partners. The transaction represents the biggest timberland sale in the U.S. in six years, Citigroup analyst Anthony Pettinari said in a research note.
The size of the deal suggests that the market for timberland is showing signs of life, after years of far smaller transactions — and that's a positive for Plum Creek and Weyerhaeuser, Pettinari wrote.
The two companies are the largest private landowners in the country. Each manages more than 6 million acres of timberland.
While annual sales of new U.S. homes remain far below the pace that economists consider normal, demand has improved this year. That has some economists forecasting new-home sales this year will outpace last year's total, which was the lowest in a half-century.
The inventory of new homes yet to be sold has fallen sharply nationwide, declining to a sales pace in May of 4.7 months. A six-month supply is generally considered healthy by economists.
If sales of new homes continue to strengthen, that could drive homebuilders' demand for lumber.
Pettinari expects that lumber prices will be stronger than expected in the second half of this year, given that lumber dealers have not built up big enough inventories to meet housing construction demand.
The analyst has "Buy" ratings on both Weyerhaeuser and Plum Creek. He has a $28 price target for Weyerhaeuser and a $47 price target for Plum Creek.
Shares of Weyerhaeuser ended regular trading up 28 cents to 23.65, while Plum Creek added 20 cents to $40.76.
Elsewhere in the sector, Deltic Timber Corp. fell 46 cents to $63.83.
Potlatch Corp. rose 28 cents to $34.92.