Bull of the Day: St. Joe (JOE) - Bull of the Day

The St. Joe Company (JOE) is a real estate developer with approximately 185,000 acres of land, concentrated primarily in Northwest Florida. Over the years, the company has developed successful residential and commercial projects and related infrastructure and is currently focused on growing its resorts, leisure and leasing operations.
 
JOE has five reportable operating segments: (1) residential real estate, (2) commercial real estate, (3) resorts, leisure and leasing operations, (4) forestry and (5) rural land. During FY 2013, about 39% of revenues came from resorts, leisure and leasing operations.
 
Solid Fourth Quarter Results

JOE reported its fourth quarter results on February 17. The company had net earnings of $0.5 million including a non-cash impairment charge of $5.1 million. Excluding charges, earnings were $0.04 per share, per Zacks. Results were better than the previous-year quarter as well as the Zacks Consensus Estimate of a loss of a cent per share.

Revenues increased 50.0% to $33.9 million, ahead of the Zacks Consensus Estimate of $25.0 million. Residential real estate, commercial real estate, as well as resorts, leisure and leasing segments delivered a solid performance but the forestry segment remained weak with no notable rural land deals in 2013.

Sale of timberland closed

In November, the company announced the sale of approximately 383,834 acres of non-strategic timberland. According to the management “this transaction will help the company concentrate on its core business activity of real estate development”.

On March 5, JOE announced the close of the deal for approximately $562 million, which included $200 million in the form of a timber note. After the sale, the management expects to continue its forestry operations on a limited basis.

Earnings estimates revisions

After strong results, analysts have revised their estimates for JOE. Estimates for FY 2014 and FY 2015 are now $0.02 per share and $0.11 respectively, unchanged and up from $0.07 per share, 30 days ago. The company has delivered positive surprises in three out of last four quarters with an average surprise of 187.5%.

Rising estimates sent JOE back of Zacks Rank #1 (Strong Buy) earlier this month.

The Bottom Line
 
The recent timberland sale appears to be a strategic fit for the company as it will be able to focus on its core operations. Further improved outlook for resorts and leisure activities suggest strong chances of outperformance in the coming months.
 
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