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Jax Daily Record Monday, Jul. 27, 201512:00 PM EST

Landstar provides a positive surprise

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by: Mark Basch Contributing Writer

Landstar System Inc. generally does a good job of keeping Wall Street up-to-date with its financial projections. Not only does the Jacksonville-based trucking company provide an earnings forecast for every quarter, it also holds a mid-quarter conference call to update investors on its progress. The mid-quarter update is a rarity among public companies.

So Landstar very rarely has any surprises when it does report its financial results. However, when the company reported second-quarter earnings last week, it did have a bit of a surprise — in a good way.

Landstar beat analysts’ forecasts with earnings of 92 cents a share, 12 cents higher than the second quarter of 2014. Analysts were projecting earnings of 88 cents to 91 cents, according to Thomson Financial.

To be fair, Landstar itself had been projecting earnings of 87 cents to 92 cents, so the final results were in its own range, albeit at the top of the range.

Landstar also had another positive surprise in its earnings report, announcing that it was increasing its quarterly dividend by a penny to 8 cents a share.

Under new CEO Jim Gattoni, who succeeded the retired Henry Gerkens at the beginning of this year, Landstar has made a subtle change in the way it reports its results.

The company had traditionally announced earnings in the morning and held its conference call with analysts at 2 p.m. It also held its mid-quarter update calls at 2 p.m. That led one to believe that there wouldn’t be anything unexpected in the report, since the calls were held in the middle of Wall Street’s trading day.

However, starting with the mid-quarter update in June, Landstar began holding its conference calls after the market closes at 4 p.m., and it didn’t release its second-quarter results until after 4 on Thursday.

When the market opened Friday morning, Landstar’s stock jumped as much as $3.67 in the early minutes of trading to $71.99. It closed Friday at $70.49, up $2.17 on the day.

In the conference call Thursday, Gattoni indicated that the third-quarter results should be similar to the second quarter.

“Currently industry fundamentals remain similar to those experienced in the 2015 second quarter. We continue to have very strong demand for our services. I expect that strength to continue throughout the third quarter,” he said.

Landstar is projecting third-quarter earnings of 87 cents to 92 cents a share, compared with 82 cents in the third quarter of 2014. Analysts had been projecting 86 cents to 93 cents, according to Thomson.

While the market reacted strongly Friday morning, Robert W. Baird analyst Benjamin Hartford said he is remaining cautious on Landstar’s stock after the earnings report.

“We are encouraged by Landstar’s volume strength in a weak industry environment, as well as its continued success recruiting BCOs,” Hartford said in a research note. BCOs, or business capacity owners, are drivers who own their own trucks and haul freight under contract for Landstar.

“However, we remain Neutral-rated and look for 1) signs of improving industrial end-market demand, or 2) signs of sustained tightening in the truckload market to become more constructive with our rating,” Hartford said.

FIS earnings beat forecasts

Fidelity National Information Services Inc., or FIS, reported second-quarter earnings fell by a penny to an adjusted 74 cents a share, but that was 3 cents higher than the average forecast of analysts surveyed by Thomson.

Jacksonville-based FIS, which provides technology services for financial institutions, said revenue fell 1 percent to $1.59 billion, but that was impacted by the strong U.S. dollar which is affecting all companies that do business overseas.

FIS said on a constant currency basis, revenue rose 3 percent, and company officials were happy with the results.

“Our earnings per share for the second quarter were better than expected and we remain on track with our current guidance for the year,” CEO Gary Norcross said in the company’s conference call with analysts.

FIS has been projecting earnings to pick up in the second half of this year.

The company is expecting revenue to grow by 1 percent to 3 percent and earnings per share to grow by 6 percent to 9 percent for the full year.

“We see the reiterated guidance as providing further support for the second half ramp-up story and think it should be a positive catalyst to the stock,” Barclays Capital analyst Darrin Peller said in a research note.

Despite the positive earnings report, FIS’ stock fell by $1.55 to $62.58 Thursday.

Robert W. Baird analyst David Koning said he was surprised to see the stock drop.

“Second-quarter results were solid and 2015 guidance reiterated, and we thought this would be enough to drive the stock higher into mixed sentiment,” Koning said in a research note.

“We view (the stock) as very good long-term value at current levels, with a more pronounced relief rally likely if the company keeps delivering,” said Koning, who has an “outperform” rating on FIS and a $72 price target.

Peller has an “overweight” rating on FIS and increased his price target from $70 to $72 after the earnings report.

“Overall, FIS remains a strong story with a high recurring revenue base, margin improvement opportunities, robust EPS growth, and solid capital returns,” Peller said.

Foley’s ‘Black Knight’ submits NHL application

As a graduate of the U.S. Military Academy at West Point, Bill Foley seems to really like the name “Black Knights,” the nickname of Army’s sports teams.

Of course, you already know about Black Knight Financial Services Inc., the mortgage technology company that was spun off from Fidelity National Financial Inc.

Now Foley, executive chairman of both Fidelity and Black Knight Financial, is using the name for another business venture not connected to Jacksonville-based Fidelity.

Foley last week formally submitted his application to the National Hockey League for an expansion franchise in Las Vegas, and he did it under the name Black Knight Sports and Entertainment LLC, according to several news reports.

Foley is the lead partner in a group that wants to bring a hockey team to a new $375 million arena under construction near the Las Vegas strip.

According to a story in the Las Vegas Review-Journal last week, Foley paid a $10 million application fee to the NHL, and the league could vote on Foley’s application in September.

If it is approved, the team could start play in 2017.

Although the NHL has been considering several cities for expansion, only one other application was filed last week by a group in Quebec City, Canada. Quebec previously had a franchise called the Nordiques, but it moved to Denver in 1995 and became the Colorado Avalanche.

Las Vegas has never had a major league franchise in any sport.

Foley has residences in several states and was buying a house in the Las Vegas area, the newspaper previously reported, but he considers Jacksonville to be his primary residence.

Fidelity unit acquires local companies

Foley’s efforts in Las Vegas are not distracting Fidelity’s continued deal-making.

Digital Insurance Inc., an employee benefits consulting firm that is 96 percent owned by Fidelity, announced last week it acquired Compass Consulting Group and its affiliate, Prospective Risk Management (PRM).

Compass and PRM, both headquartered in Jacksonville, provide employee benefits consulting and health care risk management services.

Those two businesses will operate as subsidiaries of Digital Insurance and retain their names, Digital Insurance said in a news release.

Terms of the deal were not announced.

Atlanta-based Digital Insurance is part of Fidelity National Financial Ventures, the subsidiary formed by Fidelity last year for its non-real estate-related investments. Fidelity created a tracking stock for FNFV that trades separately from Fidelity’s regular stock.

And speaking of Fidelity’s regular stock, the company also announced last week that it is increasing the quarterly cash dividend on the stock from 19 cents a share to 21 cents.

Drone Aviation makes acquisition

Drone Aviation Holding Corp. is also in an acquisition mode.

The Jacksonville-based company, which produces lighter-than-air aerostats and electric-powered drones, announced an agreement last week to buy the assets of a Georgia company called Adaptive Flight Inc.

Adaptive Flight has been developing flight control systems for unmanned aerial vehicles and the acquisition includes an autopilot system and flight simulation tools developed at the Georgia Institute of Technology, better known as Georgia Tech.

According to a Securities and Exchange Commission filing, Drone Aviation is acquiring Adaptive Flight with two $100,000 payments plus 6 million shares of Drone Aviation stock. The stock was trading at 21 cents a share at the time the deal was announced, making the value of those shares $1.26 million.

“This technology adds valuable intellectual property that would take years and considerable investment to reproduce and enables our long-term growth plans vital to our remaining at the forefront of unmanned vehicle development,” Drone Aviation Chairman Jay Nussbaum said in a news release.

General Employment prices stock sale

Another company that may be in acquisition mode, General Employment Enterprises Inc., last week said its secondary offering of 11.2 million shares of stock was priced at 70 cents a share.

The staffing company estimates net proceeds of $7.3 million from the stock sale, but that could reach $8.4 million if the underwriters exercise their option to sell an additional 1.68 million shares.

General Employment is headquartered in Naperville, Ill., but Jacksonville executive Derek Dewan became its CEO in April.

Saft getting more work at Cecil Commerce site

Saft announced a deal last week that will mean continued work at its specialized lithium-ion battery plant in Jacksonville.

The French company said it received additional orders for its Evolion battery from Reliance Jio Infocomm Ltd., a broadband services company in India. Those batteries are produced at Saft’s facility in the Cecil Commerce Center.

The order is for more than 20 million euros (about $21.8 million) worth of batteries, but the significance is that Reliance Jio has made “several” orders since 2013, Saft said.

“These latest major orders for Reliance Jio confirm that our Evolion Li-ion battery concept is now the technology of choice for demanding telecom backup in outdoor applications,” Xavier Delacroix, general manager of Saft’s Industrial Battery Group, said in news release.

Fed lifts restrictions on Atlantic Coast Financial

With the banking company now solidly profitable for the last two years, another regulatory agency has lifted its restrictions on Atlantic Coast Financial Corp.

The Jacksonville-based company last week disclosed in an SEC filing that the Federal Reserve Board terminated a supervisory agreement initiated in December 2010. That agreement put various restrictions on the company’s activities.

The written notice said Atlantic Coast Financial “is no longer considered to be in ‘troubled condition’ for savings and loan holding company regulatory purposes,” the filing said.

Atlantic Coast Financial in March received notice from the Office of the Comptroller of the Currency that it terminated a consent order against its subsidiary, Atlantic Coast Bank, which had been in effect since August 2012.

The comptroller regulates banks, while the Fed regulates bank holding companies.

ParkerVision announces distribution pact

Jacksonville-based ParkerVision Inc. last week announced an agreement with a specialty electronics distribution company in Silicon Valley to distribute ParkerVision products and services. However, ParkerVision, which has not recorded any revenue in several years, did not announce any agreements to sell its products.

ParkerVision has been developing technology which it says improves the performance of wireless devices. The distribution agreement is with RFMW Ltd., a San Jose, Calif.-based company.

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