Fidelity also looking to spin off Black Knight
As title insurance company Fidelity National Financial Inc. spins off its investment subsidiary, also it is creating a new identity for its Fidelity National Financial Ventures unit.
During Fidelity’s quarterly conference call last week, Chairman Bill Foley announced FNFV will be renamed Cannae Holdings Inc. when it becomes a separate public company.
Foley said the name will “more formally reflect its independence” from Fidelity.
Cannae is the name of an ancient Italian village where Hannibal’s army defeated the Romans.
FNFV was formed to hold non-real estate related investments of Fidelity, which has been known through the years to use its excess cash for a wide range of businesses, including stakes in several restaurant chains.
Fidelity is planning not only to spin off FNFV but also its majority stake in mortgage technology company Black Knight Financial Services Inc. as separate public companies. Fidelity expects to complete the spinoffs during the third quarter.
Fidelity spun off Fidelity National Information Services Inc. as a separate company in 2006, and while that banking technology company never changed its legal name, it brands itself as FIS.
All of the businesses currently or formerly under the Fidelity umbrella are headquartered in the same office complex on Riverside Avenue in Jacksonville.
FNFV currently trades on the New York Stock Exchange as a tracking stock. Once the spinoff is completed, Cannae will trade on the exchange as an independent company under the ticker “CNNE.”
Foley expects Cannae to actively seek new investments once the deal is completed. He said the company will have about $600 million to $700 million in cash available.
He also said the restaurant businesses have been underperforming and hinted FNFV will be exiting that industry, possibly in the near future before the spinoff is completed.
“We don’t like to deal with underperformance for an extended period of time. You’ll be seeing something happen with the restaurants,” he said.
As for Fidelity, “it’s just going to be a title company with ancillary businesses and services,” Foley said.
He said Fidelity is looking at acquisitions in the real estate brokerage area and a software initiative involving “fully automating the escrow closing and real estate purchase process from the Realtor all the way through the closing with the lender.”
The company also will consider increasing its dividends for shareholders or more aggressive stock repurchase programs, he said.
Fidelity performed well in the first quarter, reporting adjusted earnings of 42 cents a share, 9 cents higher than last year and 6 cents higher than the average analyst forecast, according to Yahoo Finance.
Black Knight reported first-quarter earnings of 30 cents a share, 3 cents higher than last year and meeting analysts’ forecasts.
FIS beats forecasts
FIS reported first-quarter adjusted earnings of 86 cents a share, 7 cents higher than last year and 4 cents higher than the average analysts’ forecast.
During the company’s conference call, CEO Gary Norcross said FIS is ahead of schedule in integrating and achieving cost savings from its late 2015 acquisition of SunGard Data Services Inc., which he called “the most transformative acquisition” in the company’s history.
Norcross said FIS now expects $300 million in annual cost savings from the SunGard deal, higher than its previous estimate of $275 million.
Robert W. Baird analyst David Koning said in a research note the additional cost savings should increase annual earnings by about 5 cents a share.
FRP waiting on tax reform
FRP Holdings Inc. has taken steps to convert into a real estate investment trust, including adjusting its fiscal year to go with the calendar.
But the Jacksonville-based commercial real estate developer is waiting to see how Congress responds to President Trump’s corporate tax plan before making its final decision whether to convert to a REIT.
“There are a number of issues we must resolve before we make the decision to convert but the most important one will be the tax rate the company will pay if we don’t convert,” CEO John Baker said during FRP’s conference call last week.
“If President Trump’s proposed 15 percent rate is approved by Congress, my recommendation to our board would be not to become a REIT at this time as tax savings would no longer outweigh the loss of financial flexibility we would give up as a REIT,” he said.
REITs are real estate companies that pay out most of their corporate earnings to shareholders as dividends, so the companies don’t have to pay taxes on that income themselves. That’s why a REIT makes more sense if corporate tax rates are higher.
“Obviously, however, there will be a lot of twists and turns before that is resolved. More to come, and thanks for your patience,” Baker told investors on the conference call.
FRP reported first-quarter earnings of 14 cents a share, down from 18 cents the previous year. The company said the lower earnings resulted from costs associated with joint ventures.
Baker outdid Wells Fargo peers
In addition to being chief executive of FRP, Baker also serves on the board of directors of Wells Fargo & Co., which was under fire at the bank’s annual meeting two weeks ago in Ponte Vedra Beach.
Although Baker and other directors faced calls to be voted out by shareholders at the meeting, all 12 returning board members were re-elected, although some narrowly squeaked by.
At the meeting, the company said the 12 directors were approved by majorities ranging from 53 percent to 81 percent but didn’t give results for individual directors.
However, in a follow-up Securities and Exchange Commission filing, Wells Fargo revealed the vote totals showing Baker outdid some of his peers, getting approval from 69.8 percent.
The directors re-elected more narrowly included board Chairman Stephen Sanger, who only garnered 55.5 percent.
Rayonier AM falls on earnings miss
Rayonier Advanced Materials Inc.’s stock fell Tuesday after the maker of cellulose specialties products reported lower-than-expected first-quarter earnings.
Rayonier AM had adjusted earnings of 15 cents a share, down from 36 cents last year and below the average analysts’ forecast of 18 cents.
It was the latest in a string of disappointing earnings reports since Rayonier AM split up with Rayonier Inc. into separate public companies nearly three years ago. The company’s stock fell $1.03 to $12.18 Tuesday after the report.
However, Rayonier AM did say it is ahead of schedule on cost-cutting initiatives, which should put the company at the high end of earnings forecasts for the full year.
“It looks to us like the market focused more on the shortfall to consensus than the raised guidance — which is myopic,” D.A. Davidson analyst Steven Chercover said in a research note.
“We are focused on cellulose specialty markets coming into balance, the potential from new product introductions, and earnings stability and growth,” said Chercover, who maintains a “buy” rating on Rayonier AM with a $22 price target for the stock.
During the company’s conference call, CEO Paul Boynton said new products are part of its plan to increase earnings in the future.
“Our focus is on making commercially attractive products that can drive growth in our existing businesses, as well as provide us an entry into other attractive and faster growing segments,” he said.
Rayonier Inc. earnings lower
Rayonier Inc. last week reported adjusted first-quarter earnings of 5 cents a share, down from 11 cents the previous year.
One of the timber and real estate company’s big moves in the quarter was the acquisition of 95,100 acres of timberland in Florida, Georgia and South Carolina for $217 million. Rayonier funded the deal by selling 5.75 million shares of stock.
In Rayonier’s conference call, CEO David Nunes said “we did not take the decision to issue equity lightly” but company officials felt the timber deal was worth it.
“Our capital allocation strategy is focused on building long-term value per share by being nimble and opportunistic and we’re pleased to have executed these recent transactions consistent with this strategy,” he said.
Web.com revenue, earnings rise
Web.com Group Inc. on Thursday reported first-quarter earnings of 13 cents a share, up from 1 cent the previous year. Adjusted revenue grew 22 percent to $186.8 million.
In the company’s conference call, CEO David Brown said he expects to see more improvement in quarterly results going forward.
“We made meaningful progress on all of our strategic initiatives and we expect the first quarter to be the trough in revenue for the year,” Brown said.
“We still have more work to do to reach our long-term objectives but the improvements we’ve made in recent quarters demonstrate our strategy is working.”
FirstAtlantic earnings even
FirstAtlantic Financial Holdings Inc. reported first-quarter earnings of 12 cents a share, even with the 2016 first quarter.
The Jacksonville-based banking company increased net interest income in the quarter, but earnings were impacted by higher compensation expense as the company increased staff.