The St. Joe Company
) - a real estate investment trust (REIT) - reported its
second-quarter 2013 earnings of 3 cents per share, beating the
Zacks Consensus Estimate by a penny and above the break-even
reported in the prior-year quarter.
For the second quarter of 2013, total revenue at St. Joe was
$33.8 million, increasing 11.2% from the prior-year quarter.
However, it came slightly below the Zacks Consensus Estimate of
The results were driven by decent revenue from real-estate sales,
resorts, leisure and leasing operations and timber business as
well as lower expenses. However, a sluggish rate of commercial
activity and lower timber volume slightly marred the positives.
Quarter in Detail
By segment, real estate sales revenues escalated 37.3% year over
year to $7.0 million. An increase in the number of residential
lots sold led to a 27.9% rise in residential revenues.
On the other hand, with St. Joe continuing to experience a tepid
and intermittent pace of commercial activity, its commercial
development revenue fell to $0.1 million from $0.6 million
reported a year ago. Moreover, with the company not
pursuing rural land sales in the recent quarters, the revenue
from it was essentially flat and immaterial.
Revenues from resorts, leisure and leasing operations increased
9.0% year over year to $17.0 million. Higher average room rates,
significant number of homes in its vacation rental business as
well as the full-year effect of commercial leases that began
during 2012 led to an uptick in the segment's revenue.
Moreover, revenue from the timber business climbed 1.0% year over
year to $9.8 million. While the company benefited from higher
prices, a decline in the tons of timber delivered mostly dwarfed
the positives. Notably, plant shutdowns or slowdown at a number
of its customers' facilities on a temporary basis, led to a
decline in the timber volume.
On the other hand, expenses registered a 1.5% decline from the
prior-year quarter to $32.2 million. Lower pension expense and
reduced real estate carrying costs primarily contributed to the
St. Joe exited the quarter with $54.1 million of cash and cash
equivalents (down from $168.7 million as of the prior-quarter
end) and $26.5 million of pledged securities (slightly below from
$26.7 million). Also, total debt outstanding was $38.2 million,
up from $35.8 million as of the prior-quarter end.
We are encouraged with the better-than-expected results at St.
Joe. The company intends to make better use of its substantial
land bank as it experiences rising demand for ready-to-build
residential lots and timber products. It has been in a defensive
mode and aims to reduce its expenses.
Yet, a persistent reduction in revenues from the rural land sales
segment somewhat reduces the growth in its profitability.
However, given the company's current efforts to enhance its
financial and market position, we expect it to mitigate the
negatives going forward.
St. Joe currently has a Zacks Rank #3 (Hold). However, other
REITs that are performing better and are worth a look include
CBRE Group Inc.
Highwoods Properties Inc.
), all of which carry a Zacks Rank #2 (Buy).
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