CSX Corp. last year rejected merger overtures from Canadian Pacific Railway Ltd., but now as the Canadian railroad pursues CSX rival Norfolk Southern Corp., its CEO suggested CSX is “in play” as a potential merger target.
Canadian Pacific has made offers over the past month to Norfolk Southern — and been rebuffed — so Canadian Pacific CEO Hunter Harrison held a conference call with analysts last week to make his case for a merger.
As he discussed Norfolk Southern, Harrison recalled his talks with CSX officials in October 2014.
“We got a signal from the board in Jacksonville that maybe we should visit and talk and so we did,” Harrison said, according to a transcript of the conference call posted by Canadian Pacific.
Harrison said he met with CSX for about two hours and found that CSX officials believed a merger would never get regulatory approval.
CSX Chief Executive Michael Ward wouldn’t comment about Canadian Pacific last year when word of the talks leaked out, but he did express his view that regulatory hurdles would likely make any big railroad merger difficult.
“Now contrary to that today, as I understand it and you can ask them better than me, they’ve effectively put themselves in play and for the right price, they would contemplate a deal,” Harrison said last week.
“Now, I don’t know what’s happened to the trust hurdles and the regulatory, but they potentially decided to get over them,” he said.
However, Canadian Pacific isn’t interested because it decided Norfolk Southern would be a better fit, Harrison said.
CSX spokeswoman Melanie Cost said by email Friday the company doesn’t comment on market speculation. But she did say “we are confident in the company’s standalone prospects and CSX has not been put up for sale.”
ParkerVision now takes on Apple
ParkerVision Inc., already embroiled in patent disputes with several wireless product manufacturers, is now taking on perhaps the biggest name in the industry, Apple Inc.
Jacksonville-based ParkerVision last week filed legal actions against Apple and three other companies, alleging that products such as Apple’s iPhone and iPad are illegally using technology that was patented by ParkerVision.
The company announced it filed a complaint with the U.S. International Trade Commission and also filed a lawsuit in federal court in Jacksonville against Apple, Qualcomm Inc. and several divisions of both LG and Samsung.
ParkerVision already has patent infringement lawsuits pending against Qualcomm and Samsung, but it said in the lawsuit filed in U.S. District Court for the Middle District of Florida that the latest complaint involves a different set of patents.
ParkerVision’s complaint with the ITC alleges the four companies are unlawfully importing products into the U.S. that infringe on the company’s patents.
“We have been, and continue to be, unflagging in our dedication to protect our intellectual property rights. The ITC action is a key part of our ongoing efforts in that regard,” CEO Jeff Parker said in a news release.
ParkerVision’s attempts to recover damages in other patent infringement lawsuits have so far been unsuccessful, including a judge’s decision to overturn a jury’s verdict that would have required Qualcomm to pay $173 million to ParkerVision.
Apple’s media relations department did not respond to email and phone messages seeking comment on ParkerVision’s lawsuit.
Analysts offer different views on Landstar
Landstar System Inc. has been basically quiet lately — actually, unusually quiet — but that hasn’t stopped analysts from weighing in on the outlook for the Jacksonville-based trucking company.
Four analysts offered differing ratings on Landstar on four consecutive business days.
It began with Avondale Partners analyst Donald Broughton upgrading his rating from “market perform” to “outperform” on Friday, Dec. 11. Broughton did not respond to requests for his report.
The following Monday, BB&T Corp. analyst Thomas Albrecht downgraded Landstar from “buy” to “hold.” Albrecht expressed concern about freight trends in his report.
“While loads are difficult to forecast, the trends in the industrial world are deteriorating, especially since Labor Day,” he said.
“While Landstar has a more variable cost model compared to asset-based carriers, the poor industrial environment bodes poorly for 2016 load trends, which should pressure estimates,” he said.
Unlike “asset-based carriers,” Landstar does not own trucks but contracts with drivers who own their own trucks to haul freight.
The day after Albrecht’s downgrade, Buckingham Research analyst Ryan Mueller began covering Landstar with a “neutral” rating, the equivalent of hold. Mueller said his firm’s policy forbids sending reports to the media.
The next day, Stifel, Nicolaus analyst John Larkin upgraded Landstar from “hold” to “buy.” Larkin’s rating was part of an overall upgrade of non-asset-based trucking companies.
“We are taking this opportunity to upgrade the shares of Universal Truckload, C.H. Robinson, and Landstar System ahead of what we anticipate to be a more normalized 2016,” Larkin said in his report.
The stocks have been down this year, but Larkin thinks those stocks are in good shape to weather any storms on the horizon for the industry.
“Stress testing on both earnings estimates and multiples shows these levels to be attractive, even under more conservative scenarios,” he said.
“The companies are in a solid position to seek out opportunistic M&A, pay dividends, and repurchase shares, in our view.”
All the different views had little net impact on Landstar’s stock. The stock closed at $57.63 on Dec. 10, before the first new report came out, and it finished Wednesday at $57.93 after the final report.
Landstar’s recent quietness is unusual because the company’s custom for years has been to give a mid-quarter update through a brief conference call with the CEO after the first two months of a quarter. That means CEO Jim Gattoni normally would have given an update in the first week of December, but there was no conference call this month.
Landstar’s investor relations department did not respond to an inquiry about why there wasn’t a mid-quarter update.
J. Alexander’s rated ‘overweight’
J. Alexander’s Holdings Inc. got its first analyst coverage since its spinoff from Fidelity National Financial Inc. last week as Stephens Inc. analyst Will Slabaugh rated its stock at “overweight.”
The company operates three restaurant chains: J. Alexander’s, Stoney River and Redlands Grill. It had been a part of Fidelity National Financial Ventures, a tracking stock for the non-real estate investments of Jacksonville-based Fidelity.
Fidelity distributed shares of J. Alexander’s to FNFV stockholders at the end of September, making the Nashville-based restaurant business an independent public company.
“We believe that the effect of its spin (vs. an IPO), combined with current market volatility has provided an attractive entry point,” Slabaugh said in his report.
He set a price target of $14 for the stock, which was trading at $10.27 when he issued his initiation report.
“We believe that the company’s commitment to both food quality and service execution play a fundamental role in driving guest loyalty at the restaurants and will be central to the longevity of all three brands,” Slabaugh said.
“Given our view that each of J. Alexander’s concepts are portable across the U.S., we believe that as investors gain confidence in the company’s ability to expand, the stock will receive a valuation that is appropriate to its level of multi-year potential, which we believe is being far underappreciated currently,” he said.
J. Alexander’s operates 41 restaurants in 14 states across all three brands.
Foley’s NHL effort continues
Speaking of Fidelity, Chairman Bill Foley’s efforts to get a National Hockey League expansion franchise for Las Vegas seem to be moving forward.
After a meeting of the NHL’s board of governors two weeks ago, Foley posted a letter to Las Vegas fans about the state of his expansion application.
“At the meeting, the Board reaffirmed that expansion for the 2017-18 season is possible and that the due diligence process related to our application is continuing,” he said.
“While a timetable for next steps has not been established, please know my team and I are working diligently to ensure we’re prepared for a positive outcome.”
Foley is the lead partner of a group hoping to bring a hockey franchise to a new $375 million arena under construction near the Las Vegas strip.
Genesee lowers forecast
Besides the trucking industry, reduced freight demand is also impacting the railroad industry, and not just the big rail lines.
Short-line railroad operator Genesee & Wyoming Inc.’s stock has been dropping amid disappointing freight trends.
Genesee fell as low as $50.07 last week, more than 50 percent below its March peak, after saying fourth-quarter earnings will be 10 cents lower than its previous forecast of 90 cents to 95 cents per share.
Genesee said fourth-quarter shipments have been weaker than expected through November, including lower shipments in North America of coal, agricultural products and metals.
Genesee, which also has operations in Europe and Australia, has 113 short line and regional railroads in 41 U.S. states and Canada. The Connecticut-based company significantly expanded its North American business in 2012 with its $1.4 billion acquisition of Jacksonville-based RailAmerica Inc., which operated 45 short-line railroads.
Vulcan’s Hill adds chairman to title
Vulcan Materials Co. announced President and CEO Thomas Hill will take on the additional role as chairman on Dec. 31, following the retirement of Chairman Donald James.
Hill was formerly Vulcan’s top executive in Jacksonville, as president of the company’s Florida Rock division. He became chief operating officer of the Birmingham, Ala.-based construction materials company in December 2013 and was promoted to president and CEO, succeeding James, in July 2014.
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