We have reiterated our Neutral recommendation on
St. Joe Company
), a real estate investment trust (REIT), as we expect the stock to
perform in line with the broader market.The company reported a net
loss of $0.9 million or 1 cent per share in first quarter 2012.
Based in Jacksonville, Florida, St. Joe is engaged in town,
resort, commercial and industrial development in addition to land
sales and commercial real estate operations. Over the years, the
company has developed successful residential and commercial
projects and related infrastructure, which in turn has attracted
regional and national businesses to the area that contributed to
the regional growth and prosperity. This provides a significant
long-term growth opportunity to the company.
The company has significantly reduced its debt through stringent
cost-cutting measures and reduction in operating expenses. The
elimination of debt greatly reduces the risk to shareholders,
giving the company the flexibility to weather any possible downturn
in residential real estate.
The opening of the Northwest Florida Beaches International
Airport, developed by St Joe, is the first new international
airport opened in the U.S. since the 2001 terrorist attack, and is
expected to become a major growth driver for the region. The
airport greatly increases the future value of its holdings, and
provides upside potential for St. Joe.
However, St. Joe has historically generated considerable revenue
from rural land sales. Amid a tough macroeconomic environment,
potential buyers have struggled to obtain finances for commercial
projects, and selling land at attractive prices has become
increasingly difficult. Consequently, revenue from rural land sales
has virtually dried up, affecting their long-term
With large exposure to residential real estate business, St. Joe
has no near-term growth catalyst and has reported losses for four
consecutive quarters in 2009 and 2011. The company is also expected
to repeat this dubious feat in 2012 as well. We would avoid
investing in the stock for the short-term.
St.Joe currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. One of its competitors,
) holds a Zacks #2 Rank, which translates into a short-term
ST JOE CO (JOE): Free Stock Analysis Report
RAYONIER INC (RYN): Free Stock Analysis Report
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