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St. Joe Q4 Earnings Beat Estimates

Zacks Equity Research

The St. Joe Company (JOE) broke even in fourth-quarter 2013 compared to the Zacks Consensus Estimate of a loss of a cent per share. The results, however, included a non-cash impairment charge of $5.1 million. The company had incurred a loss of 9 cents in the year-ago period.

Fourth-quarter results were driven by a rise in revenues, which moved up 50.0% to $33.9 million. The revenue figure also surpassed the Zacks Consensus Estimate of $25.0 million.

For full-year 2013, the company reported earnings of 5 cents per share on revenues of $131.2 million. This was down from the prior-year period in which the company earned 7 cents per share on revenues of $139.4 million.

St. Joe’s residential real estate segment, commercial real estate segment, as well as resorts, leisure and leasing segment performed well and experienced growth in revenues and margins. But the forestry segment remained a drag on its earnings and there were no notable rural land deals in 2013.

Deals in Q4

In fourth-quarter 2013, St. Joe penned two material deals. The first was a sale agreement of around 382,834 acres of timberland for $565 million to AgReserves Inc. The closure of the deal is subject to a number of conditions including the nod from the company’s shareholders. The other deal involved the sale of 4,057 acre RiverTown Community for $43.6 million in cash to the Mattamy (Jacksonville) Partnership. The selling price is, however, subject to certain adjustments.

Inside the Headlines

By segment, revenues from real estate sales significantly moved up to $17.2 million from $4.6 million in the prior-year quarter. For full-year 2013, real estate sales revenues were down 19.6% year over year.

For the full year, the company experienced a significant rise in residential real estate sales, owing to rise in demand and pricing from homebuilders for homesites in its resort and primary communities. But the results compared unfavorably year over year due to no significant deals in the company’s rural land segment in 2013 as against nine land sales for $23.4 million during 2012.

Revenues from resorts, leisure and leasing operations increased 7.7% year over year to $8.4 million. For the full year, revenues from this segment enhanced 14.4% to $50.8 million. The uptick was driven by a rise in the number and size of homes in the vacation rental program coupled with enhanced occupancy rates as well as a build-to-suit property’s full year rent.

However, revenue from the timber sales declined 18.6% year over year to $8.3 million. For full year, revenues were down 9.2% to $35.4 million. Notably, unusually heavy rainfall over the summer months and harvest limits in the AgReserves sale deal led to a decrease in the volume of tons sold.

On the other hand, expenses moved up 12.5% from the prior-year quarter to $35.9 million. But for 2013, expenses registered a decline of 5.0% from a year ago to $130.4 million as a result of a decrease in employee associated costs and reduced real estate carrying costs.

Liquidity

St. Joe exited the quarter with $21.9 million of cash and cash equivalents (down from $166.0 million as of the year-end 2012) and $26.3 million of pledged securities (slightly below from $26.8 million). Also, total debt outstanding was $44.2 million, up from $36.1 million as of the prior-year end.

Our Viewpoint

Going forward, we believe that St. Jo’s focus on enhancing resort operations, development of the port at Port St. Joe as well as the active adult residential market would help the company ride on the growth trajectory. Yet, the company is continuing to experience a tepid and intermittent pace of commercial activity and this remains a concern.

St. Joe currently has a Zacks Rank #3 (Hold). Investors interested in the real estate industry may also consider stocks like Altisource Residential Corporation (RESI), Brookfield Residential Properties Inc. (BRP) and Jones Lang LaSalle Incorporated (JLL). While Altisource and Brookfield carry a Zacks Rank #1 (Strong Buy), Jones Lang LaSalle has a Zacks Rank #2 (Buy).
 

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