We have issued an updated research report on The St. Joe Company JOE on May 29, 2015. St. Joe is making concerted efforts to maximize shareholders’ value by focusing on its resorts, leisure and leasing business.
However, last month, the company reported first-quarter 2015 net loss of $1.7 million or 2 cents per share, as against the Zacks Consensus Estimate of a profit of one cent per share, primarily reflecting a decrease in timber revenues.
Results too, came much below the prior-year quarter earnings of $403.0 million or $4.37 per share. This is because in the prior year, the company had recorded earnings of $511.1 million before income taxes due to sale of around 380,000 acres of its non-strategic timberlands and rural land to AgReserves, Inc.
First-quarter loss at St. Joe is discouraging and specifically, the sales decline in a number of its segments remains a concern. In fact, St. Joe’s forestry operations have historically been a significant contributor to its income, generating a steady flow of revenues. However, following the AgReserves Sale, income from forestry operations has declined, leading to variability in its period-to-period operational results and cash flows.
Moreover, in the residential real estate business, the customer mix has shifted from retail sales, which has a more steady revenue flow, toward sales to homebuilders. But homebuilders have a propensity for irregular, bulk purchases, adding to the volatility of the company’s top line.
Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate for 2015 FFO per share decreased to a loss of a cent per share from earnings of 12 cents. For 2016, the estimates have moved to a break-even per share from earnings of 13 cents per share. The stock currently carries a Zacks Rank #4 (Sell).
Stock to Consider
Better-ranked stocks in the real estate development sector include Alexander & Baldwin, Inc. ALEX, AV Homes, Inc. AVHI and Marcus & Millichap, Inc. MMI. While Alexander & Baldwin sports a Zacks Rank #1 (Strong Buy), AV Homes and Marcus & Millichap carry a Zacks Rank #2 (Buy).
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