Zacks' Bull Of The Day: St. Joe

Sep. 4.14 | About: St Joe (JOE)

The St. Joe Company (NYSE:JOE) is a Florida-based real estate developer with approximately 182,000 acres of land, concentrated primarily in Northwest Florida. Over the years, the company has developed successful residential and commercial projects and related infrastructure. The Company is currently focused on growing its resorts, leisure and leasing operations.

They have four operating segments--residential real estate, commercial real estate, resorts, leisure and leasing operations & forestry. During FY 2013, about 39% of revenues came from resorts, leisure and leasing operations.

Solid Second Quarter Results

JOE reported its second quarter results on August 7. Total revenue for the quarter was $68.2 million. During the quarter, the company completed its previously announced sale of the RiverTown community.

Residential real estate revenue increased from $5.5 million in the same quarter last year to $47.8 million. The RiverTown sale accounted for $43.6 million of the revenue in the quarter.

The leisure and leasing operation revenue increased $1.2 million, thanks mainly to increased number of room nights rented in vacation homes. Timber harvesting decreased to approximately 60,000 tons in the quarter compared to 340,000 in Q2 of 2013 due to sale of timberland in March.

Results were in general better than street estimates.

Earnings estimates revisions

After strong results, analysts have revised their estimates for JOE. Estimates for FY 2014 and

FY 2015 are now $4.38 per share (incorporating RiverTown sale) and $0.12 per share respectively. The company has delivered positive surprises in ten out of last twelve quarters

Rising estimates sent JOE back to Zacks Rank #1 (Strong Buy) last month.

The Bottom Line

We believe that recent sales are a strategic fit for the company as it continues to now focus on its core businesses. They also provide the company substantial cash that can be deployed for its development needs.

Per Zacks Equity Research “a significant amount of the company s land is strategically positioned near the Northwest Florida Beaches International Airport and the coast of Gulf of Mexico. The Northwest Florida Beaches International Airport, which is expected to drive growth in the region, greatly increases the future value of its holdings and provides an upside potential for St. Joe”.

The Zacks industry rank (96 out of 265) also looks favorable as of now. Further improved outlook for resorts and leisure activities suggests strong chances of outperformance in the coming months.