St. Joe Upgraded to Outperform - Analyst Blog
30 Dezembro 2011 - 12:00PM
Zacks
We have recently upgraded the
long-term recommendation for The St. Joe Company
(JOE), 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
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 an upside potential for St. Joe. The company
has also launched Venture Crossings Enterprise Centre at WestBay –
a commercial development spanning 1,000 acres adjacent to the new
airport, for industries, offices, retailers and hotels, which 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, giving the company the flexibility to weather any
possible downturn in residential real estate.
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 to it. 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 profitability.
We presently have a Zacks #1 Rank
for St. Joe, which translates into a short-term ‘Strong Buy’
rating. However, we have a ‘Neutral’ recommendation and a Zacks #1
Rank for Rayonier Inc. (RYN), 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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