St. Joe Posts Robust Q1 Earnings on Land Sales - Analyst Blog

The St. Joe Company JOE reported first-quarter 2014 earnings per share of $4.37 per share thanks to the sale of 380,000 acres of its non-strategic timberland and rural land to AgReserves Inc. for about $562 million. The company had incurred a loss of 3 cents per share in the year-ago quarter. The Zacks Consensus Estimate, excluding one-time items, was a loss of one cent per share.

St. Joe's total revenue for the quarter was $594.1 million. This figure includes the impact of that AgReserves sale. However, excluding that sale, revenues for first-quarter 2014 came in at $23.2 million, down 13.4% from $26.8 million in the prior-year quarter. The revenue figure also missed the Zacks Consensus Estimate of $28 million. This was due to a fall in timber sales and a reduction in the number of residential homesites sold, partly dwarfed by a rise in commercial real estate sales.

Quarter in Detail

Residential Real Estate revenue plunged 26.9% year over year to $5.7 million in first-quarter 2014 as a result of timing of homesite closings as well as availability of completed lots. However, margins increased to 50.9% in the reported quarter from 36.8% in the year-ago quarter.

Severe weather conditions in the reported quarter coupled with the timing of spring break and the Easter holiday resulted in an 8.9% fall in revenues to $8.2 million in the Resorts, Leisure and Leasing Operations segment.

Moreover, timber revenue declined 16.5% year over year to $8.1 million in the reported quarter as the amount of timber harvested dropped owing to the AgReserves Sale closure in March. However, the company experienced a rise in Commercial Real Estate revenue that increased to $2.4 million from $0.2 million in the prior-year quarter.

RiverTown Community Sale

Following the AgReserves sale closing in March, St. Joe accomplished the sale of RiverTown community on Apr 2, 2014. This sale was made for $24.0 million in cash, $19.6 million in the form of a purchase money note. Moreover, there was an assumption of the company's Rivers Edge Community Development District obligations at closing ($11.0 million).

It also included the post-closing obligation to acquire certain RiverTown community associated impact fee credits from the company. As a result of this sale, in the second quarter, the company expects to report a pretax income of around $26 million.

Liquidity

St. Joe exited first-quarter 2014 with cash, cash equivalents and investments of $519.2 million, up from $168.9 million as of Dec 31, 2013. Following the timber note monetization and the RiverTown sale closure, the company's cash, cash equivalents and investments increased to $710.7 million as of Apr 30, 2014.

Our Viewpoint

St. Joe is currently focused on enhancing resort operations, development of the port at Port St. Joe as well as the active adult residential market, which would help it ride on the growth trajectory going forward. The recent sales are a strategic fit for St. Joe and provide the company substantial liquidity, which it can deploy for development needs. However, a decline in revenue in a number of its segments remains our concern.

St. Joe currently has a Zacks Rank #3 (Hold). Investors interested in the real estate industry may also consider stocks like Altisource Residential Corporation RESI, AV Homes, Inc. AVHI and Mitsubishi Estate Co., Ltd. (MITEY). All these stocks carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AV HOMES INC AVHI: Get Free Report
 
ST JOE CO JOE: Free Stock Analysis Report
 
MITSUBISHI ESTA (MITEY): Get Free Report
 
ALTISOURCE RESI RESI: Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research