BofA Upgrades Potlatch to Buy, Shares Rise 4%

PotlatchDeltic (NASDAQ:PCH) shares rose more than 4% intra-day today after BofA Securities analysts upgraded the company to Buy from Neutral, raising the price target to $51 from $49.

The analysts pointed to PotlatchDeltic's over 20% underperformance year-to-date as a key factor in the upgrade, noting that while near-term fundamental catalysts may be limited, the stock offers more than 20% upside potential. The analysts highlighted that lumber prices, which have been at a cyclical low, present an opportunity for future growth. Factors such as industry capacity cuts, tariffs, and cost-curve support could lead to a rebound in lumber pricing, which directly benefits PotlatchDeltic's results. The analysts noted that for every $50 per thousand board feet (mbf) increase in lumber prices, PotlatchDeltic’s EBITDA could rise by approximately 25%, which would also positively impact timber pricing in regions like Idaho, where prices are tied to lumber trends.

Additionally, PotlatchDeltic is expected to see improved lumber margins due to its favorable cost structure, particularly following the expansion of its Waldo mill, which is projected to add about 85 million board feet of capacity. This gives the company a stronger competitive position in the lumber market moving forward.