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Jay Stein
Jax Daily Record Monday, Nov. 24, 201412:00 PM EST

Stein Mart looking for strong holidays

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by: Mark Basch Contributing Writer

After reporting third-quarter earnings that were slightly better than analysts expected, Stein Mart Inc. is optimistic about a strong holiday season, which is the most profitable time of the year for the Jacksonville-based fashion retailer.

Stein Mart on Thursday reported adjusted earnings of 2 cents a share for the third quarter that ended Nov. 1. That doesn’t sound like much, but the third quarter is typically the slowest period of the year and the company’s earnings generally hover around the break-even point, so any profit is good.

Analysts surveyed by Thomson Financial had been forecasting, on average, a 1-cent-a-share profit.

Recent results have Chairman and CEO Jay Stein optimistic about the fourth quarter.

“After a very strong September sales performance driven by the introduction of our fall merchandise, our momentum slowed slightly in October from above average temperatures and, frankly, all the macro distractions that most retailers felt for the month,” Stein said in the company’s conference call with analysts.

“For November, however, the weather has been a lot more seasonal thus far and our customers are responding extremely well to our offering. Halfway through the month, I can tell you with pleasure that our sales are very strong,” he said.

Avondale Partners analyst Mark Montagna said in a research note that Stein Mart’s third-quarter earnings position the company well for the fourth quarter.

“The third-quarter beat of 1 cent solidifies our confidence in Stein Mart hitting our fourth quarter EPS of 33 cents,” Montagna said in a research note.

According to Thomson, analysts’ earnings estimates for the fourth quarter range from 22 cents to 33 cents a share.

Montagna is confident that Stein Mart can continue to grow sales, because of the success of other off-price fashion retailers.

“Off-price is winning with its steadily increasing roster of brand names, frequent deliveries, and never having to wait for a sale,” he said.

Stein Mart is growing sales at existing stores but also expanding the chain. The company plans to open its ninth new store of the year next month in Delray Beach, which will bring the chain’s total to 270 stores.

Stein said preliminary plans for 2015 call for 10 new stores to open, two stores to relocate and two to close. One of the new stores will be the company’s first in the San Francisco Bay market, he said.

Medtronic looks to close deal in early 2015

Although its merger plan has hit some speed bumps — such as opposition from the Obama administration — Medtronic Inc. is closing in on completing its deal with Covidien plc.

“We continue to become more excited about the potential of a Medtronic-Covidien combination every day and we remain fully committed to the transaction, which we expect to close in early calendar year 2015,” Chairman and CEO Omar Ishrak said in Medtronic’s quarterly conference call last week.

“We believe the acquisition remains extremely attractive financially, even following the updated financing plan we announced in October,” he said.

Minneapolis-based Medtronic plans to move its corporate headquarters to Covidien’s offices in Dublin, Ireland, after the merger. That raised the ire of government officials, because it will allow Medtronic to avoid some U.S. taxes.

The U.S. Treasury Department announced new regulations in October that make it more difficult for companies that move their headquarters overseas to use cash from foreign subsidiaries. That forced Medtronic to alter its financing plan.

Ishrak said the merger of the two medical device companies still is attractive financially in part because the company has identified at least $850 million in annual cost savings by 2018.

“For the most part, Medtronic and Covidien are very complementary in terms of the customers we call on, the products we sell and the markets we serve. However, we know we have ample opportunity to find cost synergies in non-customer facing areas such as facility duplication, administrative redundancies and other back-office functions,” he said.

Medtronic, which intends to keep its operational headquarters in Minneapolis after the merger, has the headquarters for its surgical technologies division in Jacksonville, where it employs about 700 people.

Medtronic spokesman Fernando Vivanco said last week the company has not made any decisions about the impact of the merger on specific operations.

Medtronic’s stock reached a record high Tuesday after the company reported adjusted earnings for the second quarter ended Oct. 24 increased by 5 cents to 96 cents a share. Revenue, after adjusting for the impact of foreign currency rates on international sales, rose 5 percent to $4.37 billion.

The company said its surgical technologies division grew revenue by 10 percent after currency adjustments to $410 million.

Medtronic’s stock rose by $3.28 to $72.47 Tuesday after the earnings announcement.

Two analysts upgrade Rayonier

After a sharp drop in the stock price, two analysts last week upgraded their ratings on Jacksonville-based Rayonier Inc.

D.A. Davidson analyst Steven Chercover upgraded Rayonier from “neutral” to “buy” and RBC Capital Markets analyst Paul Quinn, who had downgraded the company to “sector perform” the previous week, raised it back to “outperform.”

Rayonier’s shares fell two weeks ago after the company reassessed its timber holdings and said it had to restate previous earnings reports, while forecasting lower future cash flows.

“While Rayonier’s disclosures earlier this month that it had overharvested its prized Pacific Northwest harvest (which will require a period of regrowth), overstated its merchantable timber base in 2013, and would have to cut its dividend were unsettling, we believe the market has overreacted,” Quinn said in his research note.

“It is worth stressing that, while Rayonier’s disclosure was unprecedented in the history of the major timber REITs, and distressing to many with long-term interaction with the firm, it is not a binary situation that challenges the firm’s existence,” Chercover said in his note.

“While the job of returning Rayonier to a sustainable growth trajectory has just begun, we believe the collateral damage to the shares is likely done. The recent review was exhaustive, costly and damaging, and a sequel is highly unlikely,” he said.

Chercover also praised new CEO David Nunes, who joined the company in June as it spun off its performance fibers business as a separate company.

“At the risk of making it personal, we have confidence in the ethics and competence of new CEO Dave Nunes, thanks to a decadelong relationship prior to his move to Jacksonville. Investors who followed his tenure at his previous firm — publicly traded Pope Resources — know that the small, Poulsbo, Washington-based timber master limited partnership’s inventory disclosure was second to none, and that its CEO (Nunes) put his money where his mouth is,” Chercover said.

“We expect more of the same going forward, and expect Rayonier will raise the bar for disclosure for its peer group,” he said.

Quinn speculated that the stock drop could have timber investment management organizations, or TIMOs, looking at Rayonier.

“With lofty private market valuations for U.S. timberland, and trade sources noting there is significant capital waiting to be invested in timber (if managers could only find the acres), at current levels Rayonier may be an affordable acquisition target for a TIMO and/or even a Weyerhaeuser or Plum Creek seeking their next transformation acquisition,” he said.

MV Portfolios unveils strategy

MV Portfolios Inc., a newly public Jacksonville company, reported no revenue in the first quarter but did give indications of its future strategy.

MV Portfolios owns a number of patents related to video drive-by and online mapping technology and in its first few months as a public company was most notable for filing a patent infringement lawsuit against Google Inc.

However, the company last week said it has agreements with Harvard University and a “major” United Kingdom university, which it has not yet named, to develop technology.

“Our goal is to take well-vetted cutting-edge intellectual property from academic labs and bring it into mainstream commercial use through investments in product development activities and commercialization agreements. We plan to create multiple startups that will grow into large corporations with global reach, all in the mobile, smart object and location based services industries,” CEO William Meadow said in a news release.

Its agreement with Harvard is an exclusive option to “invest, develop and market a patent portfolio relating to a perfect focus ‘rubber lens’ product,” the company said.

NAC profitable on derivative gain

Another new Jacksonville-based public company, NAC Global Technologies Inc., reported a third-quarter profit because of a gain from derivative securities on its balance sheet.

The company had revenue of $118,944 in the quarter but net income of $490,152 after the derivative gain.

NAC manufactures and supplies harmonic gearing technology, which is used for precision motion control applications.

The company has a small headquarters office in Jacksonville and a manufacturing facility in Port Jervis, N.Y. According to its quarterly report filed with the Securities and Exchange Commission last week, it “completes the majority of its engineering, sales, assembly, quality inspection, and shipments from its New York facility.”

Interline paying $40 million to settle suit

Jacksonville-based Interline Brands Inc. disclosed in an SEC filing last week that it agreed to pay $40 million to settle a class action lawsuit alleging violations of the Telephone Consumer Protection Act of 1991 and the Junk Fax Prevention Act of 2005.

Interline said it is denying any wrongdoing in the lawsuit filed in federal court in Illinois, but “agreed to settle to avoid the expense, inconvenience and inherent risk of litigation.”

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