The Jacksonville-based shopping center developer says it is facing “short-term headwinds” that are likely to hold back earnings growth.
Regency Centers Corp. last week reported better-than-expected third-quarter earnings. However, the Jacksonville-based shopping center developer warned bankruptcies of some key retailers are likely to hold back earnings growth heading into next year.
“The team is intensely focused on addressing short-term headwinds, driven by what we believe is a rare confluence of atypical bankruptcies together with the timing of larger redevelopments,” CEO Hap Stein said in Regency’s quarterly conference call with analysts.
President Lisa Palmer, who will succeed Stein as CEO on Jan. 1, said the company’s properties will be affected by “an elevated impact from bankruptcies” that include Barneys New York Inc. and movie theater chain iPic Entertainment.
Regency also will be hurt by store closing plans for Dressbarn and Pier 1 Imports, she said.
“Due to what we consider to be a unique set of circumstances, same-property NOI (net operating income) and core operating earnings growth in 2020 are currently expected to be flat to slightly positive,” Palmer said.
Regency is expecting net operating income at properties open for more than one year to grow by 2% for all of 2019, but that’s the low end of its previous forecast of NOI growth of 2% to 2.5%.
NOI rose by 2.1% in the third quarter that ended Sept. 30. Regency reported funds from operations of 99 cents a share in the quarter, 3 cents higher than last year and also 3 cents higher than the consensus forecast of analysts, according to Zacks Investment Research.
Funds from operations are earnings excluding noncash charges and are a key indicator of a real estate investment trust’s performance.
Regency’s portfolio of 422 properties across the country was 94.8% leased at the end of the third quarter.
“While we are cognizant of the evolving retail environment and its challenges, the quality of our portfolio, our well-located properties and top-notch team give me confidence that going forward, and consistent with our experience in the past, Regency will have relatively lower exposure to store rationalization,” Palmer said.
Although earnings beat forecasts in the third quarter, the prediction of slower growth in 2020 sent Regency’s stock down $2.51 to $67.24 last Thursday.
“Commentary from the Q3 call came as a negative surprise,” Scotiabank analyst Nicholas Yulico said in a research note Monday as he lowered his rating on Regency from “sector outperform” to “sector perform.”
Yulico said Regency’s portfolio has less risk than some of its peers for store closings over the long term.
“However, in the near-term, the vacancy impact to Regency’s portfolio is heightened from known bankruptcies/moveouts, and we think it’s too early to give full credit for the future occupancy benefit from redevelopments,” he said.
Yulico lowered his one-year price target for the stock from $72 to $69.
Rayonier reports a small loss
Rayonier Inc’s stock also dropped last Thursday after the Jacksonville-based timber and real estate company reported a small loss for the third quarter.
“Our overall results were down considerably from the prior year quarter, primarily as a result of a significantly lower contribution from our real estate segment due to the timing of transactions, as well as challenging end-market conditions in our timber segments,” CEO David Nunes said in a news release.
Rayonier recorded a net loss of $433,000 on revenue of $156.4 million. On a per share basis, that translated to a break-even quarter, while the Zacks consensus forecast was a profit of 3 cents a share.
Rayonier’s stock fell $2.45 to $26.98 after the report.
The selloff prompted D.A. Davidson analyst Steven Chercover to upgrade his rating on the stock from “neutral” to “buy” on Friday.
“While the stock has been volatile with recent earnings, we would use yesterday’s move lower as an opportunity to gain exposure to an attractively discounted set of timberland assets,” Chercover said in his research note.
“While there are no major changes to our outlook for underlying timberland segment trends, we see an improved lumber pricing environment and less volatility in weather and harvest will lead to improved 2020 results, with a China trade/tariff resolution representing a compelling call option,” he said.
Fidelity raises dividend after merger terminated
After the company dropped plans to acquire a competitor in September, Fidelity National Financial Inc. is using some of the cash no longer needed for the deal to increase its dividend.
As the Jacksonville-based title insurer reported third-quarter earnings last week, it also raised its quarterly cash dividend by 2 cents a share to 33 cents.
“It doesn’t seem like a lot,” Chairman Bill Foley said in Fidelity’s conference call.
“We want to make sure we never get in trouble in terms of our revenue and go backward with our dividend increases, and this is the time of year when we normally review and increase our dividend,” he said.
Fidelity called off an agreement to buy Stewart Information Services Corp. “given the insurmountable regulatory hurdles that we faced,” Foley said, as the company could not satisfy antitrust concerns surrounding the deal.
Fidelity reported adjusted earnings of $1.10 a share in the third quarter, up from 78 cents last year and well above the Zacks consensus forecast of 88 cents.
“This quarter produced improving trends in purchase orders opened, a strong continued quarter of refinance orders opened as well as ongoing strength in commercial orders opened,” CEO Randy Quirk said in the conference call.
“Due to the strength of our third quarter, we are well positioned to continue producing strong title business results for the remainder of 2019,” he said.
Advanced Disposal earnings rise
Advanced Disposal Services Inc. last week reported adjusted third-quarter earnings of 19 cents a share, 2 cents higher than last year.
The Ponte Vedra-based waste services company said revenue rose 4.7% to $419.5 million.
Advanced Disposal in April agreed to a buyout by Waste Management Inc. While that deal is pending and not expected to close until 2020, Advanced Disposal entered a quiet period and is not holding conference calls to discuss its quarterly results.
Deutsche Bank reports loss as it cuts jobs
Deutsche Bank last week reported a third-quarter loss as it continues to cut jobs, but the Germany-based bank said its restructuring efforts are on track.
The bank, which employed 2,100 in Jacksonville two years ago, said in July it plans to cut about 18,000 jobs to reduce its global workforce to 74,000 by 2022, but it has not said how its cuts will affect specific offices.
Deutsche Bank cut about 1,000 jobs and ended the third quarter at 89,958, the first time its total employment was below 90,000 since 2010.
The company reported a net loss of 832 million euros in the quarter, or about $924 million.
“In the first quarter of our transformation and with the uncertainty that comes with such a major restructuring, we feel good about the way our franchise is performing,” CEO Christian Sewing said in Deutsche Bank’s conference call with analysts, according to a transcript posted by the company.
St. Joe earnings rise in 3rd quarter
The St. Joe Co. last week reported third-quarter earnings of 10 cents a share, a penny higher than last year.
Revenue rose 38% to $32.8 million due to increases in real estate, hospitality and leasing revenue.
The real estate development company formerly based in Jacksonville is headquartered in Watersound in the Florida Panhandle, where most of its development projects are located.