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The St. Joe Company (JOE - Analyst Report) – a real estate investment trust (REIT) – reported its fourth quarter 2012 loss per share of 9 cents, missing the Zacks Consensus Estimate of earnings of a penny. However, the loss narrowed from the year-ago loss of $3.56 per share.

For full year 2012, St. Joe recorded net income of $6.0 million or 7 cents per share, better than the Zacks Consensus Estimate of a loss of 10 cents. Moreover, this compared favorably with the net loss of $330.3 million or $3.58 per share in 2011. Notably, the 2011 figure included pre-tax non-cash impairment charges of $377.3 million or $3.52 per share, after tax.

Behind the Headlines

For the fourth quarter of 2012, total revenues stood at $22.6 million compared with $19.8 million in the year-ago quarter. The year-over-year increase in total revenue stemmed from relatively strong performance mainly from resorts, leisure and leasing operations and timber sales segments.

For 2012, total revenues came in at $139.4 million compared with $145.3 million in 2011. The decline was attributable to a dip in revenues from timber sales segment, partially offset by improved revenues from real estate and resorts, leisure and leasing operations segments.

By segment, St. Joe’s revenues from Residential segment stood at $4.5 million compared to $3.4 million in the year-ago quarter. Commercial segment revenues came in at $0.1 million versus $1.7 million, while revenues from Timber sales segment stood at $10.2 million compared with $7.7 million in the prior-year quarter.  Resort, leisure and leasing segment revenues came in at $7.8 million compared with $6.4 million in the comparable period.

Operating Activities During 2012

In 2012, the company sold 158 residential units compared with 133 units last year. At the same time, St. Joe witnessed a higher demand in resort communities, which led to a significant hike in prices. Consequently, revenues from residential real estate sales increased 81% year over year.

Also, timber sales increased approximately 19% year over year as more land was made available to timber harvesting. In addition, strong investments in technology and infrastructure had a positive impact on increased timber production.

During 2012, revenues from the company's resorts, leisure and leasing operations business increased around 16% year over year, impacted by strong summer vacation season and the initiation of rent for two commercial leases in the second half of 2012.

In addition, the company adopted a new investment strategy, which is expected to build upon the successful cost reduction initiatives that were previously implemented and enable the company to increase short and medium-term cash flows, reduce long-term risk and maintain strong cash position necessary to withstand a tepid and volatile real estate environment.

The company intends to continue investing in projects that are expected to meet its risk-adjusted return criteria such as holdings in Venture Crossings at the Airport, the Port of St. Joe, Breakfast Point, primary home community in Northwest Florida, Rivertown and primary home community in Northeast Florida. The impact of these initiatives is likely to be viewed in 2013.

Liquidity

At the end of the year, St. Joe had $166.0 million of cash and cash equivalents and $26.8 million of pledged securities. Also, total debt outstanding was $36.1 million as it prepaid $19.3 million of debt at its RiverTown project.

Our Viewpoint

St. Joe reported decent fourth quarter on the back of remarkable growth across timber sales and resort, leisure and leasing segments. However, slight dip in real estate revenues acted as a headwind. However, the strategic investment initiatives, adopted by the company, promise better growth prospects in the long term. We expect such measures to help increase profitability of the company and provide upside potential going forward.

Another REIT Plum Creek Timber Company Inc. (PCL - Analyst Report) reported impressive fourth quarter 2012 results with earnings per share of 49 cents, significantly surpassing the Zacks Consensus Estimate of 29 cents and the year-ago quarter earnings of 38 cents.

St. Joe currently has a Zacks Rank #3 (Hold). REITs that are performing better and are worth a look include Ventas Inc. (VTR - Analyst Report) and Simon Property Group, Inc. (SPG - Analyst Report), both carrying a Zacks Rank #2 (Buy).

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