A year ago, PHH Corp.'s stock plunged after Standard & Poor's lowered its credit rating, citing concerns about the company's ability to pay debt that was coming due.
But with a new CEO on board and concerns about its finances largely erased, this holiday season is looking a lot cheerier for the New Jersey-based mortgage banking and fleet management services company.
PHH may not be as well-known as some of the other big mortgage bankers but it is one of the country's 10 largest home lenders.
The company operates its mortgage business out of its Mount Laurel, N.J., headquarters and a second service center in Jacksonville.
The company ran into trouble last December when S&P raised concerns that its cash flow was insufficient to pay off $243 million in debt that was due in March.
CEO Jerome Selitto resigned in January and was replaced by Glen Messina, a former General Electric Co. executive. By all accounts, Messina has successfully turned around PHH's financial outlook in his first 11 months on the job.
"We made significant progress on our liquidity and financing objectives in that we fully repaid our 2013 unsecured debt maturity with the combination of the proceeds of a successful debt offering and cash on hand, and we closed the third quarter with $677 million in unrestricted cash and cash equivalents," Messina said in the company's quarterly earnings release last month.
"We view the company's stronger liquidity position positively as it should remove an overhang as we believe investors are no longer concerned about whether the company can meet its funding obligations," FBR Capital Markets analyst Paul Miller said in a research note.
PHH's stock, which bottomed out at $8.75 in December 2011, has been trading at about $22 recently.
The company reported a net loss of 74 cents a share in the third quarter, which was due to a writeoff of mortgage servicing rights. But aside from that charge, the company said it produced a profit of 74 cents.
"In the third quarter, we delivered solid performance and progress in the execution of our four key strategies: disciplined growth in our franchise platforms, operational excellence, an unwavering commitment to customer service, and liquidity and cash flow generation and deleveraging," Messina said in the news release.
"The continued execution on these strategies should maximize value for our shareholders by positioning us for growth and making us a more competitive, more profitable, and more capital-efficient company," he said.
Miller cited PHH as a "top pick" in October and maintained an "outperform" rating on the stock after last month's earnings report.
"We believe PHH remains attractive considering that the company has material earnings potential in the individual components of the business, and there is likely more revenue upside to come, especially in today's mortgage banking environment," he said.
Miller isn't the only one touting PHH. A story last week in financial newsweekly Barron's said the stock still "has further to run" after more than doubling in price in the past year.
The story quoted an unnamed investor who speculated that a private-equity firm may offer to buy out the company for more than $30 a share.
"Forget the home builders: Investors looking for a play on housing should take a look at PHH," the story said.
Rayonier a play on housing market
PHH isn't the only company cited by a national financial publication last week as a play on an expected rebound in the housing markets.
Forbes magazine asked several analysts about their "best ideas" for 2013 and two of them named Jacksonville-based forest products company Rayonier Inc.
One of the analysts was Jeffrey Saut, chief investment strategist at Raymond James.
"As a real estate investment trust the company pays a comfortable dividend. It has significant timberland holdings, some commercial properties and a performance fibers division that has such a good procedure for creating cellulose the company refuses to patent it for fear of the secret getting out," Saut told Forbes.
Tony Gleason, manager of the Neuberger Berman Equity Income Fund, also told Forbes he likes timber REITs like Rayonier as one of the best ways to profit from a housing recovery.
"We're not a fan of the homebuilders. No free cash flow. No dividends. And a little too volatile for our tastes," he said.
Stein Mart announces special dividend
For the third time in the past six years, Stein Mart Inc. is paying its shareholders a special dividend.
The Jacksonville-based fashion retailer last week said its board of directors declared a $1-per-share dividend payable on Dec. 24. This follows special dividends of $1.50 in 2006 and 50 cents in 2010. Stein Mart has not paid a regular quarterly dividend since 2007.
"The special dividend reflects our continued generation of strong cash flows and provides a way to return value to our shareholders. After payment of the dividend, the company will continue its strong financial position that is more than adequate to meet our capital needs for the foreseeable future," interim CEO Jay Stein said in a news release.
Avondale Partners analyst Mark Montagna had predicted in August the company might pay a special dividend because of its strong cash position. He also said the timing is right to pay the dividend before the end of the year because of the prospect of tax changes in 2013.
Stein Mart also announced a strong start to the holiday season, with total sales in the four weeks ended Nov. 24 rising 7.5 percent to $109.8 million and comparable-store sales rising 7.1 percent.
Comparable-store sales measure sales at stores open for more than one year and are a key indicator of a retailer's performance.
"Our goal was to generate positive comp sales during the holiday selling season and we are off to a terrific start. The results were clearly a culmination of great merchandise, great marketing and proper execution at all levels," Stein said in the news release.
Analyst likes Body Central
The other Jacksonville-based fashion retailer, Body Central Corp., doesn't release monthly sales data so we don't know how holiday sales are progressing. But before Black Friday, one analyst expressed long-term optimism for the company.
Sidoti & Co. analyst Michael Richardson initiated coverage of Body Central with a "buy" rating and a $15 price target.
The stock had peaked at $31 in the spring before a series of disappointing sales reports sent it plunging to a low of $7.71 in the summer. It was trading basically between $10 and $10.50 last week.
"Favorable new store economics and ample store base expansion opportunities suggest the company can quickly regain its footing, in our opinion," Richardson said in his report.
"After collapsing to $8, the stock rebounded recently to almost $11 after Body Central maintained a 15 percent annual store growth target and indicated the merchandise and inventory issues were being addressed," he said.
Richardson predicts earnings growth of 20 percent in 2013 and 17 percent in 2014.
Coach also receives analyst's endorsement
Speaking of fashion companies, Robert W. Baird analyst Erika Maschmeyer reiterated her "outperform" rating on Coach Inc. last week after a meeting with the company's top management.
The handbag and fashion accessories company, which has a major distribution center in Jacksonville, has dropped from a high of $79.70 in March to the upper $50s recently. However, Maschmeyer said she found Coach's executives to be "upbeat."
"While some skepticism still exists amongst the investor community, we were encouraged by management's renewed energy and enthusiasm around multiple avenues for growth. We remain positive on Coach's high-quality brand and increasingly meaningful contributions from men's and international," Maschmeyer said in her report.
ADT meets expectations
In its first earnings report since becoming a separate public company, ADT Corp. reported adjusted earnings of 43 cents a share for the fourth quarter ended Sept. 28, 2 cents higher than last year and equal to the average forecast of analysts surveyed by Thomson Financial.
Total revenue rose 2.3 percent to $812 million.
The Boca Raton-based security services company, which employs about 2,000 people in Jacksonville, was spun off from Tyco International Ltd. at the start of its new fiscal year.
WhiteWave increases earnings
WhiteWave Foods Co. also issued its first earnings report since going public. The Dallas-based food and beverage maker, which has a plant in Jacksonville, was spun off from Dean Foods Co. with an initial public offering in October.
WhiteWave reported adjusted earnings of 16 cents a share for the third quarter, up from 12 cents last year. Sales rose 13 percent to $581 million.
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