On Dec 2, we upgraded our long-term recommendation on The St. Joe Company (JOE) to Outperform from Neutral, following its better-than-expected third-quarter 2013 results. Also, the company’s concerted efforts toward improving its bottom line by focusing on value enhancement of its resort communities, timberland sales and expense saving initiatives bode well going forward.
Why the Upgrade?
St. Joe’s third-quarter 2013 earnings per share of 5 cents per share beat the Zacks Consensus Estimate of 1 cent on the back of lower expenses and improved revenues from its resorts, leisure and leasing operations.
The company is currently focusing on its residential resort communities, primary homes and the active adult residential market. Recently, it announced expansion of its vacation rental program and disclosed the launch of its private membership club, St. Joe Club & Resorts.
Also, St. Joe is exploring potential opportunities to sell timber land, rural land and/or related timber rights that are not strategic to the company's core real estate development activities, following interest from prospective buyers and favorable timber market conditions. In relation to this, following the quarter end, St. Joe inked a deal to sell around 382,834 acres of timberland for $565 million. We believe such measures will continue to benefit the company in the quarters ahead as well.
As a result, analysts became more positive on this stock which currently has a Zacks Rank #1 (Strong Buy). This is evident from the movement witnessed in the Zacks Consensus Estimate over the past 30 days. For 2013, the estimate rose to 4 cents from the prior projection of a loss of 1 cent per share. Also, the Zacks Consensus Estimate for 2014 earnings per share rose to 2 cents from a break even estimated earlier.
Other Stocks to Consider
Investors interested in the real estate industry may also consider stocks like E-House (China) Holdings Ltd. (EJ), Gazit-Globe, Ltd. (GZT) and Mitsubishi Estate Co., Ltd. (MITEY). While E-House (China) holds a Zacks Rank #1 (Strong Buy), Gazit-Globe and Mitsubishi Estate carry a Zacks Rank #2 (Buy).
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