A look at 2 months of CSX cuts under Harrison

We don’t normally pay attention to this, but the major U.S. railroad companies, including Jacksonville-based CSX Corp., file monthly reports with the U.S. Surface Transportation Board on their total employment levels.
Jun. 26, 2017

by Mark Basch, Contributing Writer

With new CEO Hunter Harrison taking over at CSX in March and expectations of cost-cutting, it probably will be interesting to keep up with the numbers in the next few monthly reports.

Harrison officially started March 6 and CSX said the company already had cut 800 management-level jobs before he started.

It's unclear when those jobs would be reflected in the monthly reports. The STB data show CSX cut about 400 jobs in total between December and March, bringing companywide employment to 24,061.

After Harrison came in, total employment fell to 23,482 in mid-May, according to the most recent report filed with the STB.

Although CSX announced management-level layoffs, the biggest cuts between December and March came in maintenance jobs, which fell by 260. Office jobs were relatively stable in that period.

But from March through May, the level of “executives, officials and staff assistants” fell by 336 to 883 and the number of “professional and administrative” jobs dropped by almost 500 to 2,009.

There was an increase in jobs in the “transportation — train and engine” category of more than 300 between March and May to 9,769. Other areas remained stable.

Wolfe Research analyst Scott Group, in a brief note on the latest STB report for all the rails, said CSX had the largest reduction in headcount. 

That's not a surprise, given expectations when Harrison came in, but Group said the data was “worse than our expectations for CSX.”

We’ll just have to wait a few weeks for the June report to see how things are progressing.

Analyst upgrades Regency Centers

Regency Centers Corp. and some of its competitors fell sharply 10 days ago after Amazon.com agreed to buy Whole Foods Market Inc.

The deal creates uncertainty about the future for real estate investment trusts like Jacksonville-based Regency, which operates grocery-anchored shopping centers across the country.

However, one analyst says concerns about Regency are overblown.

“We think the recent sell-off among the shopping center REITs has created an attractive entry point for shares of Regency, as the stock has undeservedly been caught in the broader retail headwinds,” Jefferies analyst George Hoglund said in a research note as he upgraded Regency from “hold” to “buy.”

“We think the high quality, grocery anchored portfolio will outperform as retailers and grocers will focus on occupying the best shopping centers,” he said.

Hoglund said Regency has the highest grocer sales per square foot in its peer group and has a strong tenant base in its centers.

“Although Regency is not immune to the current retail storm, we think Regency will continue to be less impacted than its peers from tenant bankruptcies and store closures,” he said.

Regency’s stock fell by $2.61 to $61.45 on June 16 after the Amazon-Whole Foods deal was announced. But Hoglund has a $74 price target for the stock.

FIS upgraded

Moody's Investors Service upgraded its rating on Fidelity National Information Services Inc., or FIS, saying it has done a good job reducing debt after acquiring SunGard Data Systems Inc. in 2015.

“The upgrade reflects Moody's expectation that FIS will continue to generate substantial free cash flow (over $1 billion after dividends in 2018) while maintaining a conservative financial structure with disciplined capital allocation,” the rating agency said in a news release.

“As publicly indicated at the time of the SunGard purchase, FIS has curtailed its share repurchase and M&A activity and will likely do so until the target leverage is achieved. The upgrade also reflects FIS' growing scale and profitability as well as the progress in integrating the SunGard acquisition,” it said.

Moody's upgraded its senior unsecured rating on Jacksonville-based FIS from Baa3 to Baa2, saying the rating reflects the company's position as a leader in providing bank technology. It expects FIS to continue generating a “predictable” revenue stream.

“With the acquisition of SunGard, FIS enhanced its size and diversity with an adjacent product offering focused on capital markets and wealth management. FIS benefits from significant barriers to entry because of its significant scale, the high switching costs of its core banking software and services, and longstanding relationships with the largest banks,” it said.

TapImmune raises additional cash

TapImmune Inc. last week said it is raising about $6.82 million in additional capital through a private placement of stock and the exercise of warrants to buy stock by existing investors.

The Jacksonville-based company, which is developing immunotherapies to treat cancer, said the additional funds will help it through several clinical milestones. TapImmune has no products on the market but has several clinical trials underway.

TapImmune's announcement of a stock sale came on the same day The Wall Street Journal reported that biotech stocks are surging, with investors willing to take more risks in the sector.

“Traders say biotech’s climb is likely best explained by news reports that the Trump administration will take only modest steps to address drug pricing. That has assuaged investor concerns that more fulsome efforts to rein in drug prices are in the works, and sent them piling into the sector,” the Journal said in its MoneyBeat column.

Advanced Disposal shuffles board

Advanced Disposal Services Inc. shook up its board of directors after two of its major stockholders sold shares last month.

The Ponte Vedra-based waste management services company's largest shareholder, affiliates of Highstar Capital, sold almost 14 million shares in the secondary offering, reducing its stake in the company from 47.6 percent to 31.7 percent.

Another large shareholder, BTG Pactual, sold about 3.8 million shares, reducing its stake in Advanced Disposal from 5.2 percent to 0.9 percent.

Because of the sell-off of most of its stake, BTG's representative on the board, Sergio Pedreiro, will have to resign, Advanced Disposal said in a Securities and Exchange Commission filing.

Pedreiro is an associate partner of BTG, a Brazilian investment bank.

Meanwhile, Highstar was required to give up one of its four seats on Advanced Disposal's board as its stake was reduced. So one of its representatives, Matthew Rinklin, submitted his resignation. 

Rinklin had just been re-elected to the board at the company's annual meeting last month.

Advanced Disposal did name one replacement. E. Renae Conley, CEO of energy consulting company ER Solutions, will join the board Aug. 1.

The stock sale by BTG leaves Advanced Disposal with one other investor, besides Highstar, owning more than 5 percent of the stock. The Canadian Pension Plan Investment Board owns 18.8 percent of the shares, according to Advanced Disposal's proxy statement for its annual meeting.

THL largest Black Knight stockholder

As Fidelity National Financial Inc. gives away its stake in Black Knight Financial Services Inc. to its shareholders, an investment firm that partnered with Fidelity to buy Black Knight will become its largest shareholder.

Affiliates of Boston investment firm Thomas H. Lee Partners will continue to own 22.8 percent of Jacksonville-based Black Knight, according to an SEC filing last week.

Thomas H. Lee was a minority partner when Fidelity bought the company, then known as Lender Processing Services Inc., in 2014.

Fidelity currently owns 54 percent of Black Knight, but is distributing all of its shares in the mortgage technology company to its stockholders.

That distribution will leave one other firm, besides Thomas H. Lee, with more than 5 percent of Black Knight's stock. T. Rowe Price Associates Inc. will control 9.8 percent, according to the SEC filing.

Shoe Carnival raises dividend

Shoe Carnival Inc. last week announced it is increasing its quarterly dividend by a half-cent a share to 7.5 cents.

The footwear chain is projecting earnings this fiscal year of $1.30 to $1.45 a share, little changed from fiscal 2016 adjusted earnings of $1.40. However, the company says it is in a strong financial position.

The dividend increase “aligns with our ongoing goal of enhancing total return to our shareholders and reflects our expectation for continued generation of free cash-flow,” CEO Cliff Sifford said in a news release.

Former Jacksonville Jaguars owner Wayne Weaver is chairman and the largest shareholder of Evansville, Ind.-based Shoe Carnival. Weaver and his wife, Delores, control almost 5 million shares, or 28.6 percent of the stock.