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St. Joe Q3 Earnings Beat Estimates

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The St. Joe Company (JOE - Free Report) – a real estate investment trust (REIT) – reported its third-quarter 2013 earnings of 5 cents per share, beating the Zacks Consensus Estimate of 1 cent. However, results were below the prior-year quarter earnings of 17 cents per share.

For the third quarter of 2013, total revenue at St. Joe was $36.8 million, comfortably surpassing the Zacks Consensus Estimate of $31 million, but 34.1% below the prior-year quarter figure of $55.9 million.

The results were mainly driven by lower expenses in the quarter. Also, the company experienced growth in revenues from its resorts, leisure and leasing operations. However, lower real estate sales and a decrease in timber volume were the dampeners.

Following the quarter end, St. Joe penned a deal to sell around 382,834 acres of timberland for $565 million. The closure of the deal is subject to the nod from the company’s shareholders and the final price is dependent upon adjustments laid down in the sales agreement. The aggregate carrying value of the land that is to be sold is around $54 million as of Oct 31, 2013.

Quarter in Detail

By segment, real estate sales revenues moved down 60.2% year over year to $12.8 million. An increase in the number of residential lots sold in the company's primary home communities led to a 10.3% rise in residential real estate revenues.

The company also experienced a $2.1 million increase in revenue related to specific sales of operating properties. However, commercial real estate and rural land sales revenue were minimal in the reported quarter compared with a total of $22.5 million in the prior-year period.

Revenues from resorts, leisure and leasing operations increased 15.6% year over year to $16.3 million. Higher average room rates, significant number of homes in its vacation rental business as well as the positive impact of commercial leases led to an uptick in the segment’s revenue.

However, revenue from the timber sales declined 19.8% year over year to $7.7 million. Notably, unusually heavy rainfall over the summer months led to a decrease in the volume of timber delivered.

On the other hand, expenses registered a 17.5% decline from the prior-year quarter to $33.4 million. Lower cost of real estate sales and timber sales as well as a drop in other operating expenses primarily contributed to the decline.


St. Joe exited the quarter with $22.8 million of cash and cash equivalents (down from $166.0 million as of the year-end 2012) and $26.4 million of pledged securities (slightly below from $26.8 million). Also, total debt outstanding was $37.8 million, up from $36.1 million as of the prior-year end.

Our Viewpoint

We are encouraged with the better-than-expected results at St. Joe. The company is making efforts to maximize shareholder value by focusing on its residential resort communities, primary homes, and the active adult residential market.

Its recent deal for timberland dispositions also augur well. The move will aid the company in streamlining its focus on its core activity of real estate development in Northwest Florida and the proceeds reaped would enhance its liquidity as well as finance its growth needs. It also aims at reducing its expenses to improve its bottom line.

Yet, a persistent reduction in revenues from the rural land sales segment somewhat reduces the growth in profitability. Moreover, the company is continuing to experience a tepid and intermittent pace of commercial activity.

St. Joe currently has a Zacks Rank #3 (Hold). However, other REITs that are performing better and are worth a look include BRE Properties Inc. , Cousins Properties Incorporated (CUZ - Free Report) and Jones Lang LaSalle Incorporated (JLL - Free Report) , all of which carry a Zacks Rank #2 (Buy).

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