St. Joe Reverted to Neutral - Analyst Blog
23 Janeiro 2012 - 11:30AM
Zacks
We have recently lowered the
long-term recommendation for The St. Joe Company
(JOE), a publicly held real estate company, from ‘Outperform’ to
‘Neutral’ as we anticipate it to perform in line with the broader
market.
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 West Bay –
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.
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.
With large exposure to residential
real estate business, St. Joe has no near-term growth catalyst and
has reported losses in three of the four quarters of 2010. The
company is also expected to repeat this dubious feat in 2011 as
well. In addition, St. Joe’s business is primarily concentrated in
Florida – one of the hardest hit states in the recession. We would
avoid investing in the stock for the short-term.
We presently have a Zacks #3 Rank
for St. Joe, which translates into a short-term ‘Hold’ rating.
However, we have an ‘Outperform’ 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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