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Paul Boynton
Jax Daily Record Tuesday, Dec. 8, 201512:00 PM EST

Analyst sees FIS returning to what it 'does best'

by: Mark Basch Contributing Writer

Fidelity National Information Systems Inc., or FIS, completed its acquisition of SunGard Data Systems Inc. last week and while it’s not known what FIS will do with SunGard’s offices, one analyst expressed optimism about the merged company.

J.P. Morgan analyst Tien-tsin Huang upgraded his rating on Jacksonville-based FIS from “neutral” to “overweight” after the merger was completed.

“We view FIS’s acquisition of SunGard as a return to what FIS management does best, which is execute deal synergies,” Huang said in a research report.

“In 2012, FIS shifted its strategy from doing deals to driving organic revenue growth, which has waned recently due to various macro and execution issues. Buying SunGard is somewhat of an admission of this, in our view,” he said.

While revenue growth may slow, Huang sees an opportunity for FIS to improve its financial performance by reducing expenses and increasing profit margins of the merged company.

FIS and SunGard are both companies that provide financial technology. The merged company has more than 55,000 employees and about $9.3 billion in annual revenue.

The merger came as Pennsylvania-based SunGard was independently working on an expansion of its Jacksonville offices in the Prudential Building on the Downtown Southbank.

SunGard two years ago was approved for city and state incentives to move from the Southside to the Prudential Building, promising to add 170 jobs to the 80 employees it had at the time.

FIS has not said how the acquisition would impact SunGard’s Jacksonville office, and FIS spokesman Brad Fennessy said last week he had no update on the company’s plans.

FIS will be looking to cut costs system-wide from the combined company.

FIS has targeted $200 million in “cost synergies” by the end of 2017 and pointed out that in previous mergers, it exceeded its synergy targets.

“We believe the majority of the cost synergies will come from redundancies and duplicative overhead functions,” Huang said in his report.

Huang said FIS’ stock has been trading at about 16 times projected 2016 earnings, which is a lower price-to-earnings ratio than other financial technology companies. That puts its stock in a position to rise.

It’s been trading in the mid-$60s for the past month, but Huang set a price target of $78, up from his previous target of $70.

“We like the relative risk-reward of FIS on the assumption that cost take out execution is sharp and safer than maintaining high organic growth rates for peers,” he said.

Rayonier AM settles contract dispute

Rayonier Advanced Materials Inc. removed a major concern overhanging its business last week by resolving a contract dispute with its largest customer.

The Jacksonville-based company, which produces cellulose specialties products, said it settled the legal dispute and entered into a new sales agreement with Eastman Chemical Co. that extends through 2019. Tennessee-based Eastman accounted for 31 percent of Rayonier AM’s 2014 sales.

Rayonier AM and Eastman filed competing lawsuits in August over a dispute regarding language in their previous sales contract.

“For over 85 years we have worked closely and collaboratively with Eastman. We are pleased to have resolved our differences and entered into a new contract that continues our long and valued relationship through 2019,” Rayonier AM CEO Paul Boynton said in a news release.

The threat of the relationship breaking up sent Rayonier AM’s already faltering stock to a new low of $5.75 in early September. The stock rose as much as $1.80 to $13.01 Tuesday after the settlement was announced, its highest level since the dispute was disclosed in August.

More trouble for Latitude 360

Latitude 360 Inc. experienced more trouble over Thanksgiving weekend when it had to temporarily close its Indianapolis dining and entertainment venue over a tax dispute with state authorities.

According to reports in the Indianapolis Star, the venue was closed with orange notices on the door from the Indiana Department of Revenue indicating it had failed to turn over sales tax revenue.

However, after apparently resolving the dispute, the venue reopened Wednesday afternoon, the newspaper reported.

Jacksonville-based Latitude 360 was already facing an eviction lawsuit on the Indianapolis venue and its Jacksonville venue near The Avenues mall. Both properties are owned by an affiliate of EPR Properties and leased by Latitude 360.

After those lawsuits were filed in September, CEO Brent Brown told the Daily Record that the Jacksonville venue is doing well but the company was dealing with financial issues with the Indianapolis venue.

Latitude 360 operates a third dining and entertainment venue in Pittsburgh, but EPR has no interest in that property. The eviction lawsuit on the Jacksonville venue is pending in Duval County Circuit Court. Latitude 360 is challenging the lawsuit.

CSX lowers forecast

CSX Corp. last week lowered its earnings forecast for the rest of this year, saying a continued drop in coal shipments is affecting its results.

The Jacksonville-based railroad company had been projecting full-year 2015 earnings per share to be higher than 2014 by a mid-single digit percentage. However, at an investor conference last week, Chief Financial Officer Frank Lonegro downgraded the forecast to 3 percent growth.

“While we continue to expect to move around 30 million tons of export coal for the full year, domestic coal movements have declined more significantly in the fourth quarter than expected,” Lonegro said, according to a company news release.

Analysts had been projecting earnings of $1.98 to $2.03 a share for CSX, according to Thomson Financial, which would represent a 3 percent to 6 percent increase over 2014 earnings.

CSX’s stock fell by $1.07 to $27.53 Wednesday after the new forecast.

FRP earnings rise

FRP Holdings Inc. on Wednesday reported earnings from continuing operations rose 54 percent in the fourth quarter ended Sept. 30 to $2.1 million, or 21 cents a share.

The Jacksonville-based company split up with trucking company Patriot Transportation Holding Inc. in January. FRP develops commercial real estate properties and also owns properties that are mined for construction materials.

FRP said the improved fourth quarter results were due in part to the completion of one new office building and higher volumes at some of its mining locations.

“Fiscal 2015 provided us with the first real improvement in this business segment (mining) since the Great Recession and, barring another major economic downturn in the U.S., we are confident this trend will continue,” FRP President David deVilliers said in the company’s conference call Wednesday.

Stein Mart sales drop again

Stein Mart Inc. on Thursday said sales fell in November for the fourth straight month.

Total sales for the four weeks ended Nov. 28 fell 1.2 percent to $126.4 million and comparable-store sales (sales at stores open for more than one year) dropped 4.8 percent.

The Jacksonville-based fashion retailer said the decrease in comparable store sales came in the first two and a half weeks of the month.

Sales were then flat for the rest of November, compared with last year, and positive in the early days of December.

Stein Mart operated 278 stores at the end of November, up from 269 a year earlier.

Shoe Carnival earnings fall

Shoe Carnival Inc. last week reported comparable-store sales jumped 6 percent in the third quarter ended Oct. 31, but earnings for the quarter fell by 7 cents to 47 cents a share.

The footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver had an increase in expenses during the quarter, including a $2.5 million rise in advertising spending in August and higher non-cash equity compensation expense.

Shoe Carnival said it expects earnings for the full fiscal year to be between $1.38 and $1.43 a share, which would be 8 percent to 13 percent higher than fiscal 2014. The average analysts’ forecast had been $1.43, according to Thomson.

Weaver is chairman of Evansville, Ind.-based Shoe Carnival and its largest shareholder, with his family controlling 24.6 percent of the stock.

Valley National completes CNL deal

Valley National Bancorp last week completed its acquisition of CNLBancshares Inc., which marks the New Jersey-based banking company’s entrance into the Jacksonville market.

Orlando-based CNLBank had 16 branches, including three in the Jacksonville area. Valley National said it expects to complete the integration of those offices in the first quarter of 2016.

“CNL will help us significantly grow our Florida banker team, through the addition of many seasoned and highly regarded bankers and provide us with a new or reinforced presence in Florida’s major population centers. This acquisition complements our continuing effort to expand the Valley brand throughout our Florida, New Jersey and New York footprints,” Valley National CEO Gerald Lipkin said in a news release.

“Our outlook for Florida remains very positive and we are focused on supporting growth in that region through other acquisitions or de novo opportunities,” he said.

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