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Winn-Dixie parent reports lower third-quarter earnings

By Mark Basch, Contributing Writer

The soon-to-be parent company of the Winn-Dixie and Bi-Lo supermarket chains reported lower earnings for the third quarter, according to a Securities and Exchange Commission filing last week.

Jacksonville-based Southeastern Grocers Inc. also reported its first quarterly decline in comparable-store sales in more than four years.

Comparable-store sales, which are sales at stores open for more than one year, are a key indicator of a retailer's performance.

The financial data was included in an updated filing for a planned initial public offering. Southeastern Grocers, which will be the name of the holding company for Winn-Dixie and Bi-Lo, originally filed for an IPO in September, but it has not said when it plans to complete the stock sale.

Southeastern Grocers reported income from continuing operations of $14.2 million, down from $21.7 million in the third quarter of 2012.

Total sales in the quarter rose 0.4 percent to $2.25 billion but pro forma comparable-store sales fell 0.2 percent.

Southeastern Grocers' original IPO filing in September bragged about 18 consecutive quarterly increases in comparable-store sales. Last week's filing said it is now 18 of the last 19 quarters.

The latest filing said comparable-store sales this year have been impacted by "an increase in new competitive openings and a prior year increase in sales due to the effect of a named tropical storm that occurred in fiscal 2012."

The filing also said the company expects profitable growth going forward. "Key elements of our strategy include increasing customer loyalty, offering high-quality products, creating innovative merchandising initiatives and promotions and continuing to provide a superior, value-oriented in-store experience," it said.

The company operated 684 stores in eight Southeastern states at the end of the third quarter. It expects to have as many as 847 stores early next year after it completes a planned acquisition of three smaller chains from Delhaize America LLC.

Southeastern Grocers is currently owned by funds managed by Dallas-based Lone Star Funds. The updated filing still does not say exactly how much of the stock will be sold by Lone Star in the IPO, but it does say Lone Star will retain a majority of the stock.

Despite fine, JPMorgan Chase stock moves higher

To some, a $13 billion fine would be a time for panic.

For JPMorgan Chase & Co., it was a positive step, at least as far as Wall Street is concerned.

The global banking giant's stock actually reached its highest level in more than a decade last week, just a few days after the company announced an agreement with federal and state authorities to pay $13 billion in penalties related to mortgage-backed securities matters.

The market reacted positively to the agreement because it ends the legal squabbling and allows JPMorgan Chase to move forward.

In reality, $13 billion isn't a big deal to a bank the size of JPMorgan Chase. The company said it is "fully reserved for this settlement" and even if it wasn't, it had $207 billion in stockholder's equity at the end of the third quarter. So it could easily absorb a $13 billion hit.

JPMorgan Chase did record a net loss in the third quarter because of after-tax legal charges of $7.2 billion, in part due to mortgage-backed securities issues. However, that wasn't a concern for investors.

JPMorgan Chase's stock reached $58.14 last Monday, its highest level since 2000, according to The Wall Street Journal. The Journal said the company's market capitalization had risen by about $8 billion since the settlement agreement was announced the previous week.

The legal issues are also having no impact on JPMorgan Chase's expansion plans in the Jacksonville market. The company, which already had a major mortgage operation in Jacksonville that employs about 3,800 people, opened its first three consumer branches in the city last month, with plans to open more than a dozen in Northeast Florida.

The consumer branches operate under the "Chase" name.

Qualcomm also shrugs off legal problems

Speaking of companies that are shrugging off legal issues, Qualcomm Inc. also is trading at its highest level since 2000, according to The Wall Street Journal.

Qualcomm, as everyone in Jacksonville knows, lost in court to ParkerVision Inc. in October, with a federal jury awarding ParkerVision $173 million in damages over its allegations of patent infringement.

Jacksonville-based ParkerVision also is seeking $60 million in annual licensing payments from Qualcomm for using its patented wireless technology in Qualcomm products.

While that would be a big deal for ParkerVision, it's not a concern for investors in a company that produced $25 billion in revenue in the fiscal year ended Sept. 29.

Qualcomm held its "Analyst Day" meeting in New York two weeks ago and, as far as I can tell, ParkerVision didn't come up.

Most investors came away from the meeting with the impression that Qualcomm's future continues to be bright.

Raymond James & Associates analyst Tavis McCourt downgraded Qualcomm after the meeting, but only from "strong buy" to "outperform."

"Importantly, Qualcomm committed to a long term capital return program, and new product announcements confirm the company's dominance of high end mobile chipsets," McCourt said in a research report.

"Although we are slightly skeptical of Qualcomm's ability to grow 10 percent-plus for five years (a long time) as it guided to, we do believe that high-single-digit EPS growth looks like a conservatively prudent estimate along with a 2 percent-plus dividend yield," he said.

ADT buys back Corvex shares

ADT Corp. announced last week that it agreed to repurchase 10.24 million shares of its common stock from investment firm Corvex Management LP.

Corvex will "continue to own a meaningful number of shares" in ADT, the company said in a news release, but Corvex founder Keith Meister is resigning from ADT's board of directors.

Meister is a hedge fund manager who is known to take an activist role in companies his Corvex fund invests in. It recently acquired 2.8 million shares of Jacksonville-based Fidelity National Financial Inc. and call options to acquire another 14.6 million shares.

Meister has had discussions with Fidelity management but has been supporting the company, according to an SEC filing.

Like Fidelity, ADT is a major employer in Jacksonville. The Boca Raton-based security services company employs about 2,000 people in Jacksonville.

ADT was spun off from Tyco International Ltd. as a separate public company in October 2012.

As he left ADT's board, Meister expressed confidence in the company's future.

"We initially invested in ADT because of its leading market position and its potential for creating long-term shareholder value," Meister said in ADT's news release.

"The board and management have achieved admirable results over the past year. ADT is now on a path to achieving its optimal capital structure and implementing a capital allocation plan that will benefit shareholders in the long-run," he said.

ADT's stock fell $2.55 to $41.46 last Monday after the announcement.

Analysts tout St. Joe as a 'Hope Trade'

The only analysts currently following The St. Joe Co., Buck Horne and Paul Puryear of Raymond James, upgraded their rating on the real estate developer from "market perform" to "outperform."

The St. Joe upgrade was part of an overall upgrade of homebuilding companies in what Horne and Puryear call the "Hope Trade." Although St. Joe is not a builder, its main business is developing residential real estate communities.

In their report explaining the Hope Trade, the analysts said it "might be the most powerful and consistent seasonal trading phenomenon we've witnessed among any industry group in the market."

The Hope Trade period runs from mid-November to about Super Bowl Sunday, they said.

"Most impressively, by our count, the homebuilding sector has outperformed the S&P 500 nine consecutive years during this calendar period, and 23 of the past 29 years," they said.

Horne and Puryear did not say why this phenomenon occurs but they did say St. Joe "should benefit from its strong correlation to core homebuilders during the Hope Trade window."

The analysts have a $20 price target on the stock, which has been trading between about $17.50 and $18 for the past couple of weeks.

"We recently noted our concerns about St. Joe's increasingly opaque strategy and financial disclosures, but we do believe the recent sale of 383,000 acres of timber is a key positive that will narrow management's focus," they said.

"With St. Joe shares down 16 percent in less than two weeks and now 6 percent below our revised net asset value ($18.80/share), we believe this presents an opportune time to take advantage of a suddenly attractive valuation," they said.

mbasch@baileypub.com

(904) 356-2466

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