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Rayonier Advanced Materials CEO Paul Boynton
Jax Daily Record Monday, Feb. 2, 201512:00 PM EST

Rayonier AM disappoints Wall Street again

by: Mark Basch Contributing Writer

Rayonier Advanced Materials Inc.’s quarterly reports have been disappointing Wall Street since it was spun off from Rayonier Inc. seven months ago, and the company did it again last week.

The performance fibers company reported fourth-quarter earnings that met analysts’ predictions, but it forecast 2015 earnings below expectations.

Rayonier AM’s adjusted earnings of 61 cents a share matched the average forecast of analysts surveyed by Thomson Financial. However, the company projected earnings before interest, taxes, depreciation and amortization to be between $200 million and $220 million this year, down from $266.7 million in 2014.

The average analysts’ forecast for 2015 was $242.8 million.

Rayonier AM’s stock fell to a new low of $17.45 Wednesday morning after the earnings announcement and finished the day at $17.98, down 92 cents.

The stock was trading in the $40s in July after the spinoff, before the disappointing earnings reports began.

“While we’re not satisfied with the financial results, we’re proud of what we achieved given the circumstances,” CEO Paul Boynton said in the company’s conference call with analysts.

“As you’ve seen from our guidance, there remains continued pressure on pricing of our products and our ability to grow cellulose specialty volumes,” he said.

Oversupply issues in the cellulose specialty product market have been impacting Rayonier AM’s results. Boynton expects industrywide sales to continue to fall in 2015 before beginning a rebound.

D.A. Davidson analyst Steven Chercover said it is difficult to forecast Rayonier AM’s earnings, given the state of the market.

“With specialty cellulose markets in turmoil, results could vary significantly from projections, but we suspect management ‘measured twice and cut once’ before putting guidance into the marketplace,” Chercover said in a research report.

Rayonier AM actually reported a final net loss of 55 cents a share for the fourth quarter, after it had to set aside $69 million in reserves for environmental liabilities related to former wood pulp mills and wood treating sites. The company said those reserves are expected to cover costs over the next 20 years.

“While the reserves will not materially impact 2015 cash flows (expenditures will be spread over 20 years), it was the last thing Rayonier AM needed at this juncture,” Chercover said.

Although there’s been “nothing but fear and loathing” from Rayonier AM since the spinoff, “we can’t help but think that the Street is ‘double counting’ some of the negatives,” Chercover said.

“We retain our ‘buy’ rating due to our conviction that this is a nasty down cycle (not a dead industry) and because we believe the replacement value of Rayonier AM’s assets approaches $3 billion, nearly twice the current enterprise value,” he said.

RockTenn merging with MeadWestvaco

Rayonier AM’s plant in Fernandina Beach is the second-largest industrial employer in Nassau County. The county’s largest industrial employer, RockTenn Co., announced a large merger last week.

Norcross, Ga.-based RockTenn agreed to merge with Richmond, Va.-based MeadWestvaco Corp., creating a packaging company that produced nearly $4 billion in combined sales in the quarter ended Dec. 31.

“This transaction brings together two highly complementary organizations to create a new, more powerful company with leadership positions in the global consumer and corrugated packaging markets,” RockTenn CEO Steven Voorhees said in a news release.

In addition to its containerboard mill in Fernandina Beach, RockTenn also has a mill in Jacksonville, as well as a recycling and preprint plant in Jacksonville.

The company has a total of 11 facilities and about 1,600 employees in Florida, but it did not have specific figures for employment at its Northeast Florida plants.

MeadWestvaco does not list any Florida operations on its website.

The companies expect to save $300 million a year from “synergies,” but they did not say how the merger will impact specific operations.

Voorhees will be CEO of the merged company but the headquarters office will be in Richmond. MeadWestvaco CEO John Luke will be non-executive chairman.

The terms of the merger call for an exchange of stock in which current MeadWestvaco shareholders will end up with 50.1 percent of the company and RockTenn stockholders will have 49.9 percent.

The companies did not announce a name for the merged company.

Landstar exceeds its own forecast

Landstar System Inc. reported record high earnings and revenue in the fourth quarter that exceeded the Jacksonville-based trucking company’s own forecast.

Fourth-quarter earnings of 86 cents a share were 31 cents higher than the previous year and better than the company’s forecast of 79 cents to 82 cents a share.

Revenue from continuing operations rose 25 percent to $863 million.

“Demand for Landstar’s transportation services was very strong throughout 2014, and that strength accelerated through December. As a result, actual fourth quarter revenue and diluted earnings per share exceeded the upper end of our range of fourth quarter guidance,” CEO Jim Gattoni said in his first conference call since taking over the chief executive role from the retired Henry Gerkens.

For all of 2014, Landstar’s revenue was $3.18 billion, reaching its goal of surpassing $3 billion.

Landstar is forecasting first-quarter earnings of 71 cents to 76 cents a share, up from 61 cents a share last year.

“Overall, Landstar had an exceptional 2014. Heading into 2015, industry fundamentals remain similar to those experienced in 2014. Limited driver availability, regulation and a slight improvement in the economy should bode well for Landstar in 2015 as shippers look to providers who can access truck capacity,” Gattoni said.

EverBank a ‘tale of two halves’

According to EverBank Financial Corp. CEO Rob Clements, the company’s 2014 results were “a tale of two halves” that left the Jacksonville-based bank in a strong position heading into 2015.

“Our business and balance sheet repositioning initiatives in the first half of the year, combined with strong operating performance from our core consumer and commercial banking businesses, resulted in a strong second-half performance indicative of the returns and growth profile we expect to deliver,” Clements said in EverBank’s quarterly conference call with analysts.

EverBank reported adjusted earnings of 30 cents a share in the fourth quarter, matching the average forecast of analysts surveyed by Thomson but much higher than the 13 cents a share earned in the fourth quarter of 2013.

“We’re pleased with our results for the quarter and we continue to believe our diversified business model will enable us to produce consistent results and attractive risk-adjusted returns over varied interest rate and economic cycles, which we believe is the best formula for building shareholder value over the long-term,” Clements said.

EverBank President Blake Wilson said the second-half results included an increase in the bank’s commercial banking business.

“We expect commercial loans and deposits to continue to grow as a percentage of the overall balance sheet this year and in the years to come,” he said.

Wells Fargo Securities analyst Jared Shaw maintained an “outperform” rating on EverBank after the earnings report.

“With the company’s differentiated business model and national franchise, results should begin to benefit from operating leverage. Additionally, loan growth is better than average, and we feel shares deserve a premium valuation,” Shaw said in a research note.

However, Barclays analyst Matthew Keating is maintaining an “equal weight” rating on EverBank.

“EverBank Financial Corp.’s fourth-quarter core EPS was largely in line with the consensus. However, its 2015 outlook sounded incrementally cautious to us,” he said in his research note.

Keating said EverBank’s forecast for its return on equity is less optimistic than the company’s forecast in mid-2014.

Atlantic Coast CFO John Lent resigns

Atlantic Coast Financial Corp.’s chief financial officer is leaving the company after less than a year on the job.

The Jacksonville-based savings bank said in a Securities and Exchange Commission filing Thursday that John Lent is resigning as executive vice president and CFO.

“Mr. Lent’s departure is for personal reasons and not related to any disagreement with the company or the bank,” the filing said.

James Hogan, who had been serving as interim CFO before Lent was hired in February 2014, was appointed again as interim chief financial officer while Atlantic Coast Financial searches for a permanent replacement.

Medtronic completes Covidien deal

Medtronic Inc. last week completed its controversial acquisition of Covidien plc.

The merger of the two medical devices companies is controversial because the combined company, now known as Medtronic plc, has put its corporate headquarters at Covidien’s offices in Dublin, Ireland. That will allow Medtronic to avoid some U.S. taxes.

Medtronic is maintaining operational headquarters in Minneapolis. Its operations include a surgical technologies division based in Jacksonville.

The value of the merger, based on Medtronic’s stock price when the deal closed, was about $49.9 billion, Medtronic said.

Coach earnings beat expectations

Coach Inc. reported another quarter of lower earnings and sharply dropping sales, but its results were actually better than expected. So, its stock jumped to its highest level since June.

The handbag and accessories company reported adjusted earnings of 72 cents a share for the second quarter ended Dec. 27, down from $1.06 the previous year but better than the average analysts’ forecast of 66 cents, according to Thomson.

Total sales fell 14 percent to $1.22 billion and North American sales dropped 20 percent to $785 million.

Coach’s North American distribution center is located at the Jacksonville International Tradeport in North Jacksonville.

Coach’s stock rose as much as $3.44 to $39.90 Thursday after the earnings report.

New York-based Coach was supposed to release its quarterly report Tuesday but postponed it to Thursday because of the anticipation of a blizzard, which of course came in below expectations.

Northrop Grumman also beats forecasts

Northrop Grumman Corp.’s stock also rose Thursday after reporting not only better-than-expected fourth-quarter earnings but also a better-than-expected 2015 forecast.

The defense and aerospace company reported adjusted earnings of $2.29 a share in the fourth quarter, up from $2.12 the previous year and 4 cents higher than the average analysts’ forecast, according to Thomson.

Northrop is forecasting 2015 earnings to be between $9.20 and $9.50 a share, higher than the average analysts’ forecast of $9.11.

Northrop’s stock, which has already been trading at record highs recently, rose as much as $5.99 to a new high of $158.15 Thursday.

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