St. Joe Reports Loss

Zacks

The St. Joe Company (JOE) – a real estate investment trust (:REIT) – reported its first quarter 2013 loss per share of 3 cents, missing the Zacks Consensus Estimate of a loss of a penny. Also, the loss slightly widened from the year-ago loss of a cent per share.

For the first quarter of 2013, total revenue at St. Joe stood at $26.8 million, waning 12.1% from the prior-year quarter. However, it came in ahead of the Zacks Consensus Estimate of $25 million. While the company experienced strong performance in resorts, leisure and leasing operations as well as timber segment, a fall in revenue from real estate sales acted as a headwind.

Quarter in Detail

By segment, real estate sales revenue decreased 42.6% year over year to $8.1 million. Residential revenue more than doubled to $7.9 million from $3.8 million reported in the prior-year quarter mainly due to a rise in the number of residential lots sold.

However, commercial development revenue reported a decline of $5.8 million as the company had a large $5.4 million land sale in the prior-year quarter.  Also, rural land sale revenue fell $4.3 million as the company lacked the benefit of the rural land sales that it had in the comparable prior-year period.

Revenue from resorts, leisure and leasing operations escalated 30.4% year over year to $9.0 million. Higher average room rates, significant number of homes in its vacation rental business, an earlier spring break as well as the full year effect of commercial leases that commenced during 2012 led to an uptick in the segment’s revenue. Moreover, forestry revenue climbed 2.1% year over year as a result of higher prices for pulp and sawtimber.

On the other hand, operating expenses registered a 9.7% decline from the prior-year quarter to $29.0 million, mainly due to lower staff expenses and stock compensation costs.

Liquidity

At the end of first-quarter 2013, St. Joe had $168.7 million of cash and cash equivalents (up from $166.0 million as of the prior-quarter end) and $26.7 million of pledged securities (down from $26.8 million). Also, total debt outstanding was $35.8 million, slightly down from $36.1 million as of the prior-quarter end.

Our Viewpoint

We are disappointed with the weak results at St. Joe. as a dip in real estate revenues acted as a headwind. Moreover, persistent reduction in revenues from rural land sales segment added to the woes. Additionally, St. Joe’s business is primarily concentrated in Fla., which was one of the hardest hit states owing to the recession and this adversely affected its bottom line in the recent past. Given the current stressed economic environment in its key markets, we believe the company lacks significant growth catalyst in the near term and hence we remain bearish on the stock.

However, the company continues to focus on fixed cost reduction and intends to make better use of its substantial land bank as it experiences rising demand for ready-to-build residential lots and timber products.

Another REIT, Plum Creek Timber Company Inc. (PCL) reported impressive results for first-quarter 2013. The company’s earnings per share reached 35 cents, comfortably surpassing the Zacks Consensus Estimate of 32 cents. The results were driven by increasing demand for wood products stemming from a recovery in the residential construction market.

St. Joe currently has a Zacks Rank #4 (Sell). However, other REITs that are performing better and are worth a look include Regency Centers Corporation (REG) and Simon Property Group, Inc. (SPG) , both carrying a Zacks Rank #2 (Buy).
 

Read the Full Research Report on JOE

Read the Full Research Report on PCL

Read the Full Research Report on SPG

Read the Full Research Report on REG

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