Plum Creek Timber Co. Inc.

February 19, 2015 Plum Creek Timber Co. Inc. Current Recommendation Prior Recommendation Underperform Date of Last Change 11/23/2014 Current Price (02/18/15) $43.04 Target Price $45.00 NEUTRAL (PCL-NYSE) SUMMARY Plum Creek s fourth-quarter 2014 adjusted earnings surpassed the Zacks Consensus Estimate. Also, earnings comfortably surpassed the prior-year quarter s adjusted figure. Results benefited from growth in operating income of the timber resources segments. The company s geographically diversified private timberland portfolio, higher demand for lumber and southern sawlog and healthy balance sheet bode well for the future. However, slower pace of growth in the residential construction market, increasingly stringent environmental policies and intensified competition from a variety of substitute products such as non-wood and engineering wood products are headwinds before the company. SUMMARY DATA 52-Week High $45.32 52-Week Low $39.00 One-Year Return (%) 4.53 Beta 0.93 Average Daily Volume (sh) 1,077,469 Shares Outstanding (mil) 176 Market Capitalization ($mil) $7,575 Short Interest Ratio (days) 12.99 Institutional Ownership (%) 72 Insider Ownership (%) 1 Annual Cash Dividend $1.76 Dividend Yield (%) 4.09 5-Yr. Historical Growth Rates Sales (%) 5.5 Earnings Per Share (%) 5.3 Dividend (%) 1.3 using TTM EPS 36.5 using 2015 Estimate 36.8 using 2016 Estimate 28.9 Zacks Rank *: Short Term 1 3 months outlook 3 - Hold * Definition / Disclosure on last page Risk Level * Low, Type of Stock Large-Growth Industry Bldg Prd-Wood Zacks Industry Rank * 213 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 340 A 303 A 366 A 331 A 1,340 A 2014 317 A 356 A 375 A 428 A 1,476 A 2015 392 E 312 E 393 E 395 E 1,492 E 2016 1,538 E Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 $0.35 A $0.28 A $0.44 A $0.31 A $1.38 A 2014 $0.17 A $0.31 A $0.32 A $0.38 A $1.18 A 2015 $0.22 E $0.17 E $0.39 E $0.39 E $1.17 E 2016 $1.49 E Projected EPS Growth - Next 5 Years % 5 2015 Zacks Investment Research, All Rights reserved. www.zacks.com 10 S. Riverside Plaza, Chicago IL 60606

OVERVIEW Based in Seattle, WA, Plum Creek Timber Company Inc. is a leading publicly held timber real estate investment trust (REIT) and the largest owner of private timberland in the U.S. The company produces lumber, plywood and medium density fiberboard (MDF) at wood product manufacturing facilities in the Northwest. The company also has natural resource businesses that focus on opportunities resulting from property ownership. It includes the scope for mineral extraction and natural gas production as well as communication and transportation. Plum Creek reports its operational data under five business segments. It includes timberland operations in two business segments: the Northern Resources Segment and the Southern Resources Segment. Northern Resources Segment comprises timberlands in Maine, Michigan, Montana, New Hampshire, Oregon, Vermont, Washington, West Virginia and Wisconsin. The Southern Resources Segment consists of timberland in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Texas. Among other segments, Real Estate segment comprises sale of better-use timberland and non-strategic timberland. It also operates a real estate development business. The Manufacturing segment includes lumber mills, plywood plants, lumber-remanufacturing facilities and medium density fiberboard facilities. These facilities convert logs to lumber, plywood and other products and convert chips, sawdust and wood shavings to MDF. Moreover, Plum Creek has the Energy and Natural Resources segment consisting of the natural resource businesses, which focus on opportunities for oil and natural gas production, rock and mineral extraction, wind power and communication and transportation rights. REASONS TO BUY Plum Creek boasts geographically diversified private timberland in the U.S., with around 6.6 million acres of timberlands in the key timber producing regions, and wood products manufacturing facilities in the Northwest, Southern, and Northeast U.S., along with wood product conversion facilities in the Northwest U.S. This enables the company to benefit from large economies of scale and capitalize on the increasing value of timber over time to offset several negative effects of cyclical commodity pricing. This diversified timber and land base also provides excellent operational flexibility for the changing market conditions. Timber resource business segments continue to generate an increasing part of the total cash flow. Encouragingly, going forward, management expects higher demand for lumber in South U.S. due to limited production in Canada. Moreover, many customers have undertaken capital projects and this is expected to result in higher demand for southern sawlog in the near future. Further, as Plum Creek has a notable exposure in Southern sawlogs, any rebound in housing starts can be well capitalized on by the company. Plum Creek is focused on driving shareholders value through opportunistic share repurchases. The company has $125 million share repurchase authorization remaining under current authorization. In fact, there is a widening deviation between prices paid for timberland and private-market deals, and timberland value implied by its stock price. The company plans to leverage this value-accretive arbitrage opportunity by selling timberland at full private market price and reuse the proceeds to buy back shares and repay debt. We expect this move to be a positive for the stock. Equity Research PCL Page 2

Plum Creek boasts a robust balance sheet. The next debt maturity is due in fourth-quarter 2015. It is expected that refinancing or retirement of the debts due on 2015 will positively impact cash flows and earnings in the future. Further, with adequate liquidity, the company is well positioned to meet the commitments made to its shareholders as well as add to value to its own portfolio. REASONS TO SELL Slower pace of growth in the residential construction market remains a looming concern for Plum Creek. In fact, the company expects this tempered pace to continue in 2015 as well, and projects housing starts to climb to just 1.1 million in 2015. This sluggish pace of residential construction will result in moderate lumber production growth and modest demand for sawlog in South. Although the Southern Timberland buyout holds good for Plum Creek s long-term growth and is expected to be cash-flow accretive on a per share basis, we believe that there is lack of any nearterm catalyst for this company. In addition, Plum Creek s business is affected by the seasonality of the forest products industry and high volatility in the price of logs and manufactured wood products. Plum Creek operates in a cut-throat market and competes with national and local players on a number of factors, including quality and price. In addition, wood products face increasing competition from a variety of substitute products such as non-wood and engineering wood products. Moreover, Plum Creek s business is subject to strict environment policies, which have become increasingly stringent in the recent years. The company has to comply with all the state laws and regulations and incur significant expenditures to minimize adverse effects on the environment, failing which it could face severe penalties. This could considerably affect the company s bottom-line growth. RECENT NEWS Plum Creek's Q4 Earnings Beat Estimates, Revenues Up Jan 26, 2015 Plum Creek s fourth-quarter 2014 adjusted earnings came in at $0.38 per share, $0.04 above the Zacks Consensus Estimate. Including the after-tax gain from insurance recoveries related to the Montana MDF plant fire, the company s earnings were $0.39 per share. Also, earnings comfortably surpassed the prioryear quarter s adjusted figure of $0.31 per share. Results benefited from growth in operating income of the timber resources segments. Total revenue for the quarter was $428 million, up 29.3% year over year. Further, it beat the Zacks Consensus Estimate of $415 million. Segment Performance in Q4 Operating income at the company s Northern Resources came in at $10 million in the reported quarter up 25% year over year. While Northern sawlog prices increased 6%, average hardwood pulpwood prices moved up about 5% year over year. Overall harvest volumes were mostly similar. The Southern Resources segment posted an operating income of $38 million, up 11.8% year over year. Total harvest volume moved up 11% year over year. Further, southern sawlog prices increased 5%, whereas pulpwood prices moved up $1 per ton. Equity Research PCL Page 3

Operating income at the Real Estate segment increased 35.5% year over year to $42 million. The Manufacturing segment recorded an operating income of $14 million, up 75% year over year. The results included gains from insurance recoveries associated with MDF fire. Excluding the gain, the segment s operating income improved 25% year over year, mainly driven by higher industrial panel prices. Lastly, the Energy and Natural Resource segment reported an operating income of $7 million, up 40% year over year. Liquidity Plum Creek ended fourth-quarter 2014 with $92 million in cash and cash equivalents, up from $90 million at the end of the prior quarter and down from $433 million at 2013-end. Total long-term debt stood at $2.0 billion, down from $2.4 billion at year-end 2013. Outlook Plum Creek projects the residential construction activities to grow at a measured pace in 2015, leading to around 1.1 million housing starts. The company expects to harvest 19 20 million tons of timber in 2015, almost similar to that of 2014. The company projects the Real Estate segment sales to range from $250 $300 million, with first-quarter sales of around $100 $110 million. Lumber, specialty plywood and MDF markets are expected to remain strong in 2015. Disregarding the impact of 2014 MDF fire, earnings from the Manufacturing segment are anticipated to be similar to the comparable year-ago figure. Further, the company estimates 2015 third-party interest expenses at around $106 million, similar to what was incurred in 2014. In fact, the company expects 2015 to bear a resemblance to the preceding year in many aspects. Cash flows in 2015 are likely to be similar to that of the prior year. However, the company anticipates lower earnings in 2015, as land basis is expected to be around 5% higher in this year. Plum Creek projects 2015 net income in the range of $1.05 $1.30 per share. Share Repurchase During 2014, Plum Creek bought back shares worth $50 million at a discount to net asset value and will consider further buyback activities, going forward. Dividend Update On Feb 4, 2015, Plum Creek announced a quarterly cash dividend of $0.44 per share on its common stock. The dividend will be paid on Feb 27, 2014, to shareholders of record as of Feb 13. Equity Research PCL Page 4

VALUATION The shares of Plum Creek currently trade at 36.8x the Zacks Consensus Estimate for 2015, a 20.9% discount to the industry average. On a price-to-book basis, the shares trade at 4.7x, a 51.6% premium to the industry average. Our 6-month target price of $45.00 equates to 38.5x the Zacks Consensus Estimate for 2015. Combined with a quarterly dividend of $0.44 per share, this price target implies an expected total return of 6.6% over that period. This is consistent with our Neutral recommendation on the shares. Moreover, the company currently carries a Zacks Rank #3 (Hold). Key Indicators F1 F2 Est. 5-Yr EPS Gr% P/CF 5-Yr High 5-Yr Low Plum Creek Timber Co. Inc. (PCL) 36.8 28.9 5.0 21.8 36.5 48.0 26.1 Industry Average 46.5 27.7 6.1 21.5 26.8 NM 19.0 S&P 500 16.7 15.6 10.7 15.3 19.3 19.4 12.0 Louisiana-Pacific Corp. (LPX) NM 21.6 5.0 60.4 NA 61.7 12.3 Rayonier Inc. (RYN) 67.7 55.3 5.0 18.6 34.1 36.7 17.5 Potlatch Corporation (PCH) 23.3 19.1 5.0 14.0 18.4 55.6 15.9 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA Plum Creek Timber Co. Inc. (PCL) 4.7 6.8 3.8 12.1 1.7 4.0 19.4 Industry Average 3.1 3.1 3.1 12.2-2.8 1.9 17.2 S&P 500 5.3 9.8 3.2 25.5 NA 2.1 NA Equity Research PCL Page 5

Earnings Surprise and Estimate Revision History Equity Research PCL Page 6

DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of PCL. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1126 companies covered: Outperform - 15.8%, Neutral - 76.0%, Underperform 7.4%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Coverage Team QCA Lead Analyst Analyst Copy Editor Content Ed. 11C Kalyan Nandy Moumita C. Chattopadhyay Sanjoy De Anuja Mitra Moumita C. Chattopadhyay Equity Research PCL Page 7