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Jax Daily Record Monday, Apr. 29, 201312:00 PM EST

As legal issues wind down, LPS looks to increase business


After more than three years of investigations by federal and state authorities into foreclosure processes, the legal issues that have saddled Lender Processing Services Inc. and its mortgage banking clients are winding down.

For Jacksonville-based LPS, which provides technology services to mortgage lenders, the focus now is on increasing business as financial institutions adjust to new industry standards.

"As lenders move beyond legacy issues, including the recent settlement of many bank consent orders, we are seeing an even greater focus on deploying technology to re-engineer processes and to address the cost structure of originating and servicing loans," LPS Chief Executive Officer Hugh Harris said in the company's quarterly conference call last week.

"We are collaborating with our clients, including the nation's leading and emerging mortgage institutions, to address these needs," he said.

Jacksonville-based LPS in recent months has announced settlements with federal authorities and the attorneys general of 49 states related to the company's role in the nationwide foreclosure mess. An LPS subsidiary was accused of falsifying documents used in foreclosure proceedings by its mortgage lender clients.

In addition to LPS' legal issues, some of the nation's largest lenders have been ordered by authorities to reform their foreclosure procedures.

While LPS hopes to gain new business in the future, a slowdown in foreclosure activity is currently affecting the company's results.

While LPS last week reported that adjusted first-quarter earnings rose 10 percent to 66 cents a share, revenue in the quarter fell by 2.9 percent to $471.7 million, due to lower default services revenue.

"Over the past year, foreclosure activity has declined to near pre-crisis levels as servicers adapt to new requirements," Harris said.

"While the near-term outlook remains difficult to predict, we continue to believe we are well-positioned to win our share of industry volumes over time," he said.

Although the foreclosure market is uncertain, Barclays Capital analyst Darrin Peller said in a research note that the mortgage refinance market is a source of strength for LPS.

"We believe that refi origination activity will continue to provide resilience throughout 2013, while the default services segment remains soft," said Peller, who maintains an "overweight" rating on the stock.

However, Kevin McVeigh of Macquarie Securities maintained his "underperform" rating following the earnings report.

"While results and guidance were in line with expectations, we believe many investors were expecting a beat and raise given the strength of the refinancing market," McVeigh said in his research note.

Landstar earnings flat

Landstar System Inc. reported first-quarter earnings of 57 cents a share, unchanged from last year, with revenue dropping 3 percent to $628.3 million.

However, CEO Henry Gerkens put the performance into perspective in the company's conference call with analysts.

"All that being said, the 2013 first-quarter revenue performance was the second-best first- quarter revenue performance in Landstar's 25-year history, second only to 2012, a tough comp," he said.

Gerkens said the Jacksonville-based trucking company's lower revenue was mainly due to slower demand from industrial accounts, particularly for transportation of heavy industrial equipment.

Investors were probably more disappointed in Gerkens' outlook for the second quarter, as he said demand has continued to be soft in April.

He projected earnings of 68 cents to 73 cents per share for the second quarter, which is lower than the average forecast of 79 cents by analysts surveyed by Thomson Financial.

Despite the disappointments, Jason Seidl of Cowen Securities said he is maintaining a "buy" rating on the stock.

"We believe the long-term outlook remains favorable, and Landstar's 50 percent operating margin goal within three to five years remains attainable given modest to solid economic growth," Seidl said in his research note.

Rayonier earnings up strongly

Rayonier Inc. reported first-quarter earnings from continuing operations of 79 cents a share, up from 41 cents last year and well above the average analysts' forecast of 61 cents, according to Thomson.

CEO Paul Boynton said in Rayonier's conference call that the forest products company is profiting from a housing market rebound.

"In the first quarter, we realized benefits from the early stages of a recovering U.S. housing market as saw log prices and saw log pulpwood mix improved. As the homebuilding market gains momentum, we expect to see further strengthening in saw log demand and prices in the U.S. South as well as increased interest in our real estate development properties," he said.

Despite the jump in first-quarter earnings, Boynton predicted only "slight improvements" in earnings overall this year.

D.A. Davidson analyst Steven Chercover said he is remaining cautious in his earnings forecast, along with Rayonier management, as the Jacksonville-based company completes a significant expansion of its mill in Jesup, Ga.

"While we do not foresee transition or startup difficulties, it is a complicated project, and Rayonier is correct to manage expectations," Chercover said in a research note. He maintains a "neutral" rating on the stock.

RBC Capital Markets analyst Paul Quinn said he is maintaining a "sector perform" rating on the stock.

"We still believe there is a compelling long-term (24-36 months) investment case in Rayonier," Quinn said in his research report. "At this point, we just see more upside in our building product names in 2013."

EverBank beats forecast

EverBank Financial Corp. last week reported first-quarter adjusted earnings rose by 1 percent to $44 million, or 33 cents a share. That was 4 cents higher than the average analysts' forecast, according to Thomson.

"We are pleased with our results for the quarter, which demonstrate the diversity and flexibility of our banking franchise," CEO Robert Clements said in the company's conference call with analysts.

"We believe our high quality banking franchise and the strength of our business model positions EverBank for sustainable earnings growth over the intermediate term. Based on the robust growth in our core deposit franchise, coupled with the positive momentum in our commercial and residential lending businesses, we are confident in our ability to create shareholder value over the long-term," he said.

EverBank's stock had fallen back from its high of $17.29 in March, but it rose $1.52 to $15.92 Thursday after the report.

Before the stock started rising Thursday, Sterne, Agee & Leach analyst Peyton Green raised his rating on the stock from "neutral" to "buy."

"We are raising our rating on EverBank to buy given the recent pullback and our belief that EPS will exceed consensus in 2013-2014 due to (1) strong jumbo origination/sales volumes, (2) commercial real estate and leasing loan growth, (3) declining regulatory costs, and (4) improved mortgage servicing profitability," Green said in a research note.

Another investor opposes Atlantic Coast Financial merger

Atlantic Coast Financial Corp.'s amended merger agreement last with Bond Street Holdings Inc. has not changed the votes of shareholders who oppose the deal. In fact, another investor came out against the deal last week.

A United Arab Emirates investor named Amin Fadul Ali filed a Securities and Exchange Commission statement Friday indicating he has acquired 9.5 percent of Atlantic Coast Financial's stock and will vote his shares against the merger.

The Albury Investment Partnership, an Australian investment firm that controls 10 percent of the stock, previously said it will vote against the merger of Jacksonville-based Atlantic Coast Financial with the South Florida banking firm.

Also, Atlantic Coast Financial board members Jay Sidhu and Bhanu Choudhrie, who together control 6.6 percent of the stock, reiterated their opposition last week after the amended merger agreement was announced.

That's a total of 26 percent of the company's shares pledged to vote against the proposed merger.

The original agreement with Bond Street called for Atlantic Coast Financial Corp. stockholders to receive $3 per share when the deal is completed, with another $2 a share put into an escrow account to cover the costs of possible shareholder claims against the company.

The new agreement announced last week guarantees that stockholders would get the full $5 upon completion of the merger.

Sidhu, who has proposed a recapitalization plan as an alternative to a merger, sent a letter to the board of directors last week saying the company is worth more.

"We think that a price of at least $8 per share would give ACFC stockholders a clear choice between cash now and increased value over time by continuing their investment with an independent, profitable ACFC," the letter said.

Jacksonville Bancorp names new chairman

Jacksonville Bancorp Inc. last week announced that Donald Glisson was named chairman of the board. Glisson is chairman and chief executive officer of Triad Financial Services Inc., a Jacksonville-based consumer finance company.

Glisson previously had served as chairman of Atlantic BancGroup Inc. before that local banking company merged with Jacksonville Bancorp in November 2010. He has served on the board of Jacksonville Bancorp since the merger.

Glisson succeeds Gary Winfield, who had been chairman since July 2012. Winfield will continue to serve on the company's board of directors.

Jacksonville Bancorp also last week announced a plan to raise additional capital through a shareholder rights offering. Current shareholders will be issued rights to buy additional shares of the banking company for 50 cents a share.

Jacksonville Bancorp's stock closed at 54 cents Thursday before the rights offering was announced Friday morning.

Northrop earnings defy budget cuts

Despite fears of the impact of federal budget cuts on major defense companies, Northrop Grumman Corp. last week reported earnings well above analysts' forecasts, sending the stock to a 52-week high.

First-quarter earnings of $2.03 per share were 7 cents higher than last year and much higher than the average forecast of $1.74 by analysts surveyed by Thomson.

According to Bloomberg News, the budget cuts have been a "non-event" for defense contractors, with General Dynamics Corp. and Lockheed Martin Corp. reporting results similar to Northrop.

Northrop's stock rose $2.28 to $73.77 Wednesday after the report and it rose further to a high of $74.97 Thursday.

Northrop is moving forward with plans to expand its St. Augustine aerospace facility, where it employs 1,100 people. The expansion is expected to add 400 jobs within four years.

Coach Inc. yo-yo continues

The yo-yo pattern for Coach Inc.'s stock over the past year continued last week as a positive earnings report sent the stock higher.

The handbag and fashion accessories company, which has a major distribution center in Jacksonville, reported earnings of 84 cents a share in the third quarter ended March 30, 7 cents higher than the previous year and 4 cents higher than the average Thomson forecast.

Coach also announced that it is increasing its annual dividend by 15 cents a share to $1.35.

The stock jumped $4.96 to $55.55 Tuesday after the report. Coach's stock has been swinging wildly with each earnings report over the past year. It fell from a peak near $80 in March 2012 to a low of $45.87 in February.

Gannett revenue drops

Gannett Co. Inc. last week reported adjusted first-quarter earnings of 37 cents a share, 3 cents higher than last year and 2 cents higher than the average Thomson forecast. However, revenue of $1.238 billion was slightly below the average analysts' forecast of $1.242 billion.

Gannett's stock dropped $1.05 to $19.98 Tuesday after the report.

Declines in newspaper advertising offset revenue gains in other areas. Gannett's 23 television stations, including WTLV TV-12 and WJXX TV-25 in Jacksonville, increased revenue by

8.5 percent to $185.5 million, despite a drop in political advertising in a non-national election year.

The company's television revenue also was lower than the first quarter of 2012 because of a move of the Super Bowl from NBC, which is affiliated with 12 Gannett stations, to CBS this year, which is affiliated with six.

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