Jaguars owners Shad Khan.

Khan increasing Jaguars’ earnings

Franchise value nearly triples to $2 billion.
Sep. 25, 2017

Forbes magazine’s annual look at the value of NFL franchises, released last week, showed the Jaguars have become a lot more profitable since Shad Khan bought the team.

Forbes, which estimates each team’s finances with data from several sources, said the Jaguars’ operating income reached $89 million last season, up from $29.6 million when Khan bought the team in 2012.

Operating income had been basically flat for several years before that, according to the Forbes data.

Player expenses, the largest operating expense for an NFL team, have generally been steady over the last five years. But the Jaguars’ revenue has grown from $238 million in 2012 to $377 million in 2016.

The earnings and revenue growth are not necessarily related to changes in the Jaguars’ operations. The team is benefiting from overall growth in NFL revenue.

Forbes estimates 70 percent of the Jaguars’ revenue comes from its share of league revenue, including its big national television contracts.

Forbes said the average operating income for each NFL team reached a record $101 million last year.

The magazine said besides selling media rights, the league is expanding revenue with investments in other areas, including spending $90 million for a stake in Jacksonville-based sports merchandise firm Fanatics.

With earnings rising, Forbes said the value of the Jaguars franchise has grown from $770 million — the price Khan paid in 2012 - to an estimated $2.075 billion now.

Rayonier AM hit by Irma costs

Rayonier Advanced Materials Inc. became the first Jacksonville company to specify a cost from Hurricane Irma, saying the storm could reduce this year’s earnings by more than 20 percent.

Rayonier AM shut down its cellulose specialties products plants in Fernandina Beach and Jesup, Georgia, as Irma approached the area two weeks ago. 

The plants reopened Sept. 12 after Irma passed, and the company said Tuesday they were back operating at full capacity.

However, the cost of stopping and restarting operations is expected to reduce net income by $6 million, and shipment delays will cut sales volume and lower earnings by another $1 million, the company said.

At the end of the second quarter, Rayonier AM forecast earnings of $32 million to $39 million for 2017. It now is forecasting earnings of $31 million for the full year.

Rayonier AM’s stock moved little after the lower forecast last week, with investors more focused on the long-term outlook and the company’s pending merger with Montreal-based Tembec Inc.

The companies have received all antitrust clearances for the merger, which will more than double Rayonier AM’s size and expand its geographic reach. 

Rayonier AM said it expects to complete that deal in the second half of the fourth quarter.

Irma postpones CSX listening session

Irma caused the U.S. Surface Transportation Board to postpone its scheduled “listening session” for CSX Corp. to hear complaints about service disruptions from its customers.

The STB last week said it rescheduled the session, originally set for Sept. 12, to Oct. 11.

CSX freight customers have made numerous complaints about service disruptions on the railroad as new CEO Hunter Harrison implements his Precision Scheduled Railroading system.

In its weekly service update, CSX said key metrics continued to improve and “Hurricane Irma did not interfere with broad recovery momentum.”

After the storm, CSX “re-established rail service in most of the Southeast U.S. within hours, into and out of Northern Florida within 24 hours, and throughout the vast majority of the state within one week,” the company said.

CSX said it had to clear nearly 8,000 fallen trees from its tracks and deployed more than 700 generators to provide power to signals and crossings.

The company has not announced additional costs related to Irma.

Analyst hears more CSX complaints

While Irma was bearing down on Florida, many industry players were attending a transportation and logistics conference in Indianapolis held by FTR, a freight transportation intelligence firm.

In a report after the conference, Stifel analyst John Larkin said attendees continued to complain about CSX’s service.

“CSX service, while improving off the bottom, is still subpar, according to numerous attendees,” Larkin said.

“Norfolk Southern clearly has picked up some service sensitive market share and truckers have been deluged with calls looking for truckload capacity to run freight around frustrating CSX delays,” he said.

Larkin didn’t mention Jacksonville-based trucking firm Landstar System Inc. in his report, but he did discuss the trends that have been helping Landstar’s stock recently.

“Truckload supply and demand was tightening in May and June and remained relatively tight during the early stages of the third quarter,” he said. “Hurricanes Harvey and Irma, though, have accelerated the rate of tightening fairly dramatically.”

Landstar, which has provided trucking services for hurricane recovery efforts in the past, is expected to benefit because it has more capacity to handle the demand than its competitors. That has sent the company’s stock higher since Harvey hit Texas last month.

“Capacity is flowing to Texas and Florida with emergency supplies on board. As the emergency/rescue phase of the recovery winds down, we expect the rebuilding effort to kick off. Demand for rebuilding supplies should be strong for an extended period,” Larkin said.

Analyst downgrades Regency Centers

Regency Centers Corp. has been dealing with short-term challenges as Irma shut down the Wells Fargo Center, where the shopping center developer maintains its corporate headquarters.

However, one analyst is concerned about longer-term trends in the grocery industry impacting Regency. Most of the company’s shopping centers across the country are anchored by supermarkets.

“The grocery environment has become more challenging and will likely only get worse,” Jefferies analyst George Hoglund said in a research report on the industry.

Hoglund downgraded Regency from “buy” to “hold” and lowered his price target on the stock from $74 to $67, with the stock trading at $65.47 at the time.

“While we acknowledge that Regency has a high-quality portfolio and management team, we think that increasing concerns on the grocery sector following the Amazon/Whole Foods combination will weigh on Regency, as approximately 79 percent of its portfolio is grocery-anchored,” he said.

“While we still believe that Regency will continue to outperform its shopping center peers on a same-store net operating income basis in the near term, we think that the increased grocer headline risk will weigh on the group and impair stock performance in the near-to-medium-term, relative to other REIT sectors.”

Hoglund said Jefferies’ grocery analyst, Chris Mandeville, is negative on the sector because of Amazon and other trends.

“The confluence of factors includes the Walmart and Kroger investment in lowering prices, the expansion of the hard discounters (Aldi/Lidl), Target’s greater focus on the grocery category, and growing online competition,” he said.

Regency has long been considered a strong and stable real estate investment trust, or REIT, because grocery-anchored shopping centers had been seen as more resistant to economic downturns. Hoglund noted he upgraded Regency to “buy” in June because of that.

“Admittedly, the timing of our upgrade was pure bad luck, as it occurred the same morning of the Amazon/Whole Foods announcement. As such, Regency sold off 4.1 percent that day,” he said.

Northrop rises on Orbital deal

Northrop Grumman Corp.’s stock jumped to a record high last week after announcing a $9.2 billion deal to buy Orbital ATK Inc., another aerospace and defense technologies firm.

Orbital, which specializes in missile defense systems and rockets, will become a fourth business sector for Northrop, which currently operates in the aerospace, mission systems and technology services sectors.

Virginia-based Northrop’s operations include an aerospace facility in St. Augustine.

Northrop said it expects to achieve $150 million in cost savings when it integrates operations of the two companies and it will be accretive to cash flow and earnings, but it did not give forecasts.

Northrop’ stock rose $8.94 to $275.97 last Monday after announcing the merger and reached a high of $281.57 on Wednesday.