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Should You Retain St. Joe (JOE) Stock in Your Portfolio?
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We updated our research report on The St. Joe Company (JOE - Free Report) on May 10.
Last week, this WaterSound, FL-based real estate development and operating company displayed a better-than-expected earnings performance in first-quarter 2017. The company reported net income per share of 6 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 3 cents. Results reflected a decline in total expenses.
However, total revenue for the quarter fell from the prior-year period. Total revenue for the quarter came in at $13.2 million compared with $20.3 million recorded in the prior-year period. Decline in real estate revenue primarily dragged down the top-line figure. Moreover, the prior-year period result included a $3.4 million unimproved land sale, with a gross profit of $3.3 million.
Notably, St. Joe has been making concerted efforts to expand its portfolio of income producing properties and sustain a low fixed expense structure. The company increased the size and scope of its leasing portfolio with the acquisition of the two Beckrich office buildings, which added more than 67,000 square feet of leasable space to the company’s portfolio. Also, the joint venture with HomeCorp for 240 apartment units is in sync with this strategy.
In addition, the company aims to maximize shareholders’ value by focusing on strategic investment in the club and resort operations. We believe that the efforts to fortify these segments would help the company bolster its revenues. In fact, given the volatility in revenues from real estate and timber lines in the past quarters, performance of the company’s resorts, leisure and leasing segments cushioned the results in the reported quarter.
However, volatility in sales revenues of a number of segments at the company is a major concern. In fact, St. Joe’s forestry operations have historically been a significant contributor to its income. This segment generated a consistent flow of revenues. However, following the AgReserves sale, income from forestry operations has reduced, leading to variability in its period-to-period operational results and cash flows.
Additionally, in the residential real estate business, the customer mix has shifted from retail sales that have a more steady revenue flow to sales to homebuilders. However, homebuilders have a propensity for irregular, bulk purchases, adding to the volatility of the company’s top line.
Also, shares of St. Joe underperformed the Zacks categorized Real Estate Development industry over the past six months. St Joe’s shares descended 6.4% over this time frame, while the industry climbed 20.5%.
AV Homes’ estimates for 2017 earnings of $1.00 per share reflect anticipated growth of 4.2%. Henderson Land Development Company’s earnings estimates for 2017 climbed 4.3% over the past 60 days to 48 cents. Mitsubishi Estate Co. has long-term growth rate of 5.3%.
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Should You Retain St. Joe (JOE) Stock in Your Portfolio?
We updated our research report on The St. Joe Company (JOE - Free Report) on May 10.
Last week, this WaterSound, FL-based real estate development and operating company displayed a better-than-expected earnings performance in first-quarter 2017. The company reported net income per share of 6 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 3 cents. Results reflected a decline in total expenses.
However, total revenue for the quarter fell from the prior-year period. Total revenue for the quarter came in at $13.2 million compared with $20.3 million recorded in the prior-year period. Decline in real estate revenue primarily dragged down the top-line figure. Moreover, the prior-year period result included a $3.4 million unimproved land sale, with a gross profit of $3.3 million.
Notably, St. Joe has been making concerted efforts to expand its portfolio of income producing properties and sustain a low fixed expense structure. The company increased the size and scope of its leasing portfolio with the acquisition of the two Beckrich office buildings, which added more than 67,000 square feet of leasable space to the company’s portfolio. Also, the joint venture with HomeCorp for 240 apartment units is in sync with this strategy.
In addition, the company aims to maximize shareholders’ value by focusing on strategic investment in the club and resort operations. We believe that the efforts to fortify these segments would help the company bolster its revenues. In fact, given the volatility in revenues from real estate and timber lines in the past quarters, performance of the company’s resorts, leisure and leasing segments cushioned the results in the reported quarter.
However, volatility in sales revenues of a number of segments at the company is a major concern. In fact, St. Joe’s forestry operations have historically been a significant contributor to its income. This segment generated a consistent flow of revenues. However, following the AgReserves sale, income from forestry operations has reduced, leading to variability in its period-to-period operational results and cash flows.
Additionally, in the residential real estate business, the customer mix has shifted from retail sales that have a more steady revenue flow to sales to homebuilders. However, homebuilders have a propensity for irregular, bulk purchases, adding to the volatility of the company’s top line.
Also, shares of St. Joe underperformed the Zacks categorized Real Estate Development industry over the past six months. St Joe’s shares descended 6.4% over this time frame, while the industry climbed 20.5%.
Currently, St. Joe has a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the real estate industry may consider stocks like AV Homes, Inc. (AVHI - Free Report) , Henderson Land Development Company Limited (HLDCY - Free Report) and Mitsubishi Estate Co., Ltd. (MITEY - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AV Homes’ estimates for 2017 earnings of $1.00 per share reflect anticipated growth of 4.2%. Henderson Land Development Company’s earnings estimates for 2017 climbed 4.3% over the past 60 days to 48 cents. Mitsubishi Estate Co. has long-term growth rate of 5.3%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>