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Paul Boynton
Jax Daily Record Monday, Nov. 2, 201512:00 PM EST

Rayonier AM rises on earnings report

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by: Mark Basch Contributing Writer

Rayonier Advanced Materials Inc. shareholders have seen nothing but bad news since the company split up with Rayonier Inc. in mid-2014, but the stock was one of the top performers on the New York Stock Exchange Thursday after a positive third-quarter earnings report.

Jacksonville-based Rayonier AM, which produces cellulose specialties products, reported adjusted earnings of 78 cents a share, up from 53 cents in the third quarter of 2014 and well above analysts’ forecasts of 39 cents to 51 cents, according to Thomson Financial.

That report sent the company’s stock up by $2.02 to $10 Thursday. While that’s still a long way from the stock’s peak in the $40s shortly after the spinoff in July 2014, the 25.3 percent one-day gain was the second-best increase among NYSE-listed stocks Thursday.

In the company’s conference call with analysts, CEO Paul Boynton said Rayonier AM has been working on three objectives: to reduce costs, optimize assets and come out with new and enhanced products.

“We continue to make significant progress across the board on all of these platforms, and most immediately on our cost reduction initiative,” he said.

The company said it is approaching its goal of reducing annual costs by $40 million, but it did not detail the expense cuts.

Rayonier AM’s biggest problem has been oversupply issues in the cellulose specialty product market since it split from Rayonier Inc. However, the company revealed another issue in August when it disclosed a contract dispute with its biggest customer, Eastman Chemical Co., which accounted for 31 percent of Rayonier AM’s 2014 sales.

The companies filed competing lawsuits against each other. Boynton said Thursday both cases are proceeding under seal and are being treated confidentially, so he couldn’t give details.

“We and Eastman continue to work constructively towards a mutually agreeable resolution and we’ll update our investors when we have information to report,” he said.

D.A. Davidson analyst Steven Chercover said in a research note Rayonier AM is making some progress on a turnaround.

“While we like roller coasters in real life, Rayonier AM’s wild ride since the split has been anything but fun,” Chercover said .

“Rayonier AM is by no means out of the woods, but it’s encouraging to see glimpses of strength when it runs well and executes on plan,” he said.

Black Knight beats forecasts

In its first full quarter as a public company, Black Knight Financial Services Inc. beat analysts’ forecasts.

The Jacksonville-based mortgage technology company that was spun off from Fidelity National Financial Inc. in May reported adjusted third-quarter earnings from continuing operations rose 13 percent to $38.9 million, or 25 cents a share.

Analysts were forecasting earnings of 22 cents to 24 cents, according to Thomson.

“As you can see from our financial performance in the third quarter and year to date, the fundamentals of our business remain very strong,” Black Knight Chairman Bill Foley said in the company’s conference call.

“I’m very proud of the accomplishments we’ve made to date and I believe Black Knight is uniquely positioned to capitalize on the opportunities generated by the tailwinds in the U.S. mortgage industry,” he said.

Fidelity rethinks restaurant spinoff

Fidelity, which is mainly a title insurance company, continues to spin off its investments in non-title businesses, including a recent spin of restaurant company J. Alexander’s Holdings Inc.

Fidelity also owns a majority stake in another restaurant company called American Blue Ribbon Holdings, which owns five restaurant chains, and was planning a spinoff of that business.

However, Foley, who is also chairman of Fidelity, said last week the company was rethinking its options for American Blue Ribbon.

The restaurant business is part of Fidelity’s FNFV Group subsidiary, which holds Fidelity’s non-real estate-related investments and trades separately as a tracking stock.

During FNFV’s quarterly conference call last week, Foley said it may not make sense to keep all five of American Blue Ribbon’s chains in one company because they serve different segments of the restaurant business.

Fidelity is working to sell off its Max & Erma’s restaurant chain and is considering splitting up the other four chains — Ninety Nine, Village Inn, Baker’s Square and O’Charley’s — into separate companies.

“As we worked through our J. Alexander’s spinoff, we started thinking more about ABRH and should it really be distributed in the form of one company or should it possibly be three companies that are more akin to their own characteristics,” Foley said.

“So, we’re really evaluating whether or not we want to do three transactions, one transaction or two transactions,” he said. “The other complicating factor is that, if we were to do three transactions, we need to have three years of audited statements for each company.”

So, plans for American Blue Ribbon are on hold.

Fidelity earnings below forecasts

Meanwhile, Fidelity reported third-quarter adjusted earnings of 60 cents a share, up from 51 cents in the third quarter of 2014 but lower than the average analyst’s forecasts of 62 cents, according to Thomson.

Foley said in Fidelity’s conference call that its title insurance business needs an improvement in the residential home buying market to increase profit margins.

“The residential purchase market continues to steadily improve and the residential refinance market has been declining, although a recent drop in rates may provide a further period of improving refinance volumes,” he said.

EverBank earnings drop

EverBank Financial Corp. last week reported adjusted third-quarter earnings of 23 cents a share, 10 cents lower than last year.

“Despite the fact that our third quarter financial results were negatively impacted by a challenging market environment and some unusual items, our business fundamentals remain solid as we continue to execute our strategy of generating strong consumer and commercial loan and deposit growth,” CEO Robert Clements said in EverBank’s conference call.

Clements said low interest rates impacted the bank’s loan sale transactions, resulting in lower than expected non-interest income. He also said the bank increased its provision for possible loan losses because of one specific borrower.

Chief Financial Officer Steve Fischer said in the conference call the customer has a $45 million loan secured by three office buildings, and EverBank incurred a $5 million loss provision on that loan. The bank’s total loan loss provision in the quarter was $11.1 million.

“Despite the ongoing challenges in the market environment, we expect fourth quarter earnings to rebound significantly driven by growth in net interest income, reduction in provision expense, and improvement in non-interest income,” Clements said.

EverBank’s stock fell $2.08 to $18.30 Wednesday after the earnings report.

Atlantic Coast Financial earnings up

Atlantic Coast Financial Corp. last week reported third-quarter earnings of 7 cents a share, more than double its 2014 third-quarter earnings of 3 cents.

The parent company of Atlantic Coast Bank expects to be in an advantageous position in the Jacksonville market after a couple of bank merger deals last month.

“The recent announcements of consolidation in Northeast Florida further enhance our opportunity to truly build the premier community bank in the markets we serve,” Atlantic Coast Financial CEO John Stephens said in the company’s news release.

Last week, Atlanta-based Fidelity Southern Corp. (no relation to Fidelity National Financial) announced an agreement to buy Jacksonville’s American Enterprise Bankshares Inc.

That followed the Oct. 1 announcement that Ameris Bancorp agreed to buy Jacksonville Bancorp Inc.

Ameris is officially headquartered in Moultrie, Ga., but it is moving its executive offices to the Riverplace Tower on Jacksonville’s Southbank.

Ameris reported operating earnings of 49 cents a share for the third quarter, 5 cents higher than last year.

Web.com has mixed results

Web.com Group Inc. on Thursday reported third-quarter adjusted earnings of 62 cents a share, a penny lower than last year but above its forecast range of 59 cents to 61 cents.

Adjusted revenue fell 2.4 percent to $140.4 million, but that was slightly higher than the company’s forecast range of $138.5 million to $140 million.

During the third quarter, Web.com announced a data breach that exposed credit-card information for about 93,000 of its 3.3 million customers. The company did lose some business from that, CEO David Brown said in the company’s conference call with analysts.

Brown said Web.com estimated it lost about $350,000 in revenue in the third quarter and it expects about $1 million in lost revenue per quarter related to the breach.

However, Brown said, “We believe the event is behind us and will have a small short-term impact on the business.”

Regency meeting goals

Regency Centers Corp. last week reported core funds from operations of 76 cents a share in the third quarter, 5 cents higher than last year and 2 cents higher than the average forecast of analysts, according to Thomson.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key earnings metric for real estate investment trusts like Regency.

“Our results continue to be extremely gratifying. We are achieving Regency’s key strategic goals and objectives,” CEO Hap Stein said in the company’s conference call.

The goals include net operating income growth of 4 percent, which Regency exceeded in the third quarter with 4.7 percent NOI growth for properties owned for more than one year.

Regency’s portfolio of 318 retail properties was 96 percent leased at the end of the third quarter.

Deutsche Bank announces job cuts

Deutsche Bank last week finally announced the mass layoffs everyone has been waiting for since the spring. However, the Germany-based bank is still not saying if its restructuring will affect its plans to grow in Jacksonville.

Deutsche Bank said it is eliminating 9,000 full-time jobs plus about 6,000 “external contractor positions.”

The company will reduce its employment by another 20,000 by selling off some businesses, Deutsche Bank officials said in a news conference, according to several reports. It currently has about 100,000 employees plus 30,000 contractor positions.

While this restructuring process has been going on for months at Deutsche Bank’s headquarters, the company in July received approval from the City Council for a $5.5 million incentive package to add 475 jobs in Jacksonville over the next two years. That would bring its employment in Jacksonville to 2,124.

A Deutsche Bank spokeswoman said the company would not comment on how or if the latest corporate restructuring plan would affect its Jacksonville plans.

Drone Aviation announces reverse split

Jacksonville-based Drone Aviation Holding Corp. on Friday announced a reverse stock split in which stockholders will get one share of stock for every 40 shares they owned before the split.

Drone Aviation’s stock closed at 13 cents Thursday when the split took effect. It was quoted at $5.11 Friday morning on the OTC market after the split.

The stock is trading under the temporary ticker symbol “DRNED” for 20 days, and then it will go back to its regular “DRNE” symbol.

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