We have recently upgraded the long-term recommendation for
The St. Joe Company
), a publicly held real estate company, from Neutral to Outperform,
primarily due to its strong future growth prospects.
Based in Jacksonville, Florida, St. Joe is one of the largest real
estate developers of Northwest Florida. 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.
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 attacks, and is expected to become a major
growth driver for the region. The airport greatly increases the
future value of its holdings, and provides an upside potential for
The company also launched Venture Crossings Enterprise Center at
West Bay - a commercial development spanning 1,000 acres adjacent
to the new airport. The project is developed for industries,
offices, retailers and hotels, and will likely have a positive
economic impact on the region in the long run.
Over the last few quarters, St. Joe 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 and strengthens the balance sheet with a more
efficient and less capital-intensive business model.
Furthermore, St. Joe is the majority landowner in Northwest
Florida, and most of the real estate developers in the region are
forced to acquire land from it at high market price and
subsequently build amenities in order to provide any meaningful
competition. These offer a significant long-term competitive
advantage to St. Joe.
However, St. Joe has historically generated considerable revenue
from rural land sales. With 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, and is likely to affect its long-term
We presently have a Zacks #1 Rank for St. Joe, which translates
into a short-term Strong Buy rating. We also have an Outperform
recommendation and a Zacks #2 Rank (short-term Buy rating) for
), one of the competitors of St. Joe.
ST JOE CO (JOE): Free Stock Analysis Report
RAYONIER INC (RYN): Free Stock Analysis Report
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