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Basch Report
Jax Daily Record Thursday, Jan. 16, 202005:20 AM EST

Stein Mart moved to lowest Nasdaq tier; Analyst upgrades CSX

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What once was Drone Aviation now based in Dallas; Regency, CSX make Newsweek’s ‘responsible’ list.
by: Mark Basch Contributing Writer

With its stock continuing to trade below $1, Stein Mart Inc.’s listing was moved to a lower tier in the Nasdaq market.

The Jacksonville-based fashion retailer moved Jan. 8 from the Nasdaq Global Select Market to the Nasdaq Capital Market. It continues to trade under the ticker symbol “SMRT.”

The move means little change for investors but a lower tier means lower prestige for a stock.

Stein Mart actually dropped two tiers. The Global Select Market is Nasdaq’s highest of three tiers and the Capital Market is the lowest, with the Nasdaq Global Market in the middle.

Nasdaq notified Stein Mart in July that it could be delisted by Jan. 6 if its stock price didn’t recover. The company last week said when Nasdaq approved its move to the lower tier, it also gave it an additional 180 days until July 6 to regain compliance with minimum price rules.

“As part of its transfer application, the Company notified Nasdaq that if the stock price does not recover sufficiently during the additional grace period, it intends to take actions to regain compliance with the minimum bid price requirement, including by effecting a reverse stock split, if necessary,” Stein Mart said in a news release.

For the first nine months of fiscal 2019, Stein Mart reported a 3.7% drop in total sales and a 1.9% decline in comparable-store sales, or sales at stores open for more than one year.

The company launched several initiatives in the fall that it expects to boost sales, but its stock price hasn’t moved as Wall Street waits for results showing improvement in the sales trends.

Stein Mart’s stock has not closed above $1 since May.

Tegna getting political ad gains

Tegna Inc. last week said it expects fourth-quarter revenue of $688 million to $693 million, up 7% to 8% from last year.

The operator of 62 television stations, including NBC affiliate WTLV TV-12 and ABC affiliate WJXX TV-25 in Jacksonville, had been projecting mid-single digit percentage growth. However, Tegna said it benefited from “2020 political advertising spending beginning in earnest earlier than anticipated.”

The company also is benefiting from growth in fees paid by cable and satellite television providers to carry its stations, and a recent acquisition of 13 television stations also is lifting revenue.

Tegna is projecting its political ad revenue will be more than $300 million this year, which would just about double the $155 million it had in the last presidential election year in 2016. 

The company operated 46 stations in 2016, but its projections suggest the average station in its portfolio will take in an average of about $1.5 million more in political ad revenue this year than four years ago.

In an off year for elections, Tegna reported political ad revenue of just $14 million in the first nine months of 2019.

Tegna said revenue excluding political advertising will be up 14% to 15% for all of 2019.

Analyst upgrades CSX to ‘positive’

In advance of CSX Corp.’s year-end earnings report, Susquehanna Financial Group analyst Bascome Majors upgraded the Jacksonville-based railroad from “neutral” to “positive.”

“We’re upgrading CSX to Positive into 2020 and now see it as the top value play in rails over the next 12 months on a mix of sour near-term sentiment driven by coal, 2019 underperformance, and low valuation (absolute and relative), including a particularly attractive free cash flow yield among rails that has proven durable in recent years,” Majors said in his report last week.

“Our sense is buy-side sentiment is largely there, with CSX management front-footed with cautious messaging on coal for several months now, and shares underperforming and de-rating more than any other Class I since our downgrade to Neutral last April,” he said.

Majors said overall he is “constructive” on the railroad industry, despite expectations of lower freight volume through the first half of this year and into the third quarter.

“Several of the prominent soft spots for rail can be explained by reasons beyond an incremental U.S. macro downshift, particularly coal (falling international prices for exports, natgas near multi-year lows for domestic utility), intermodal (oversupplied truckload market, carriers cutting rates and gaining share), and grain (tariffs, delayed harvest),” he said.

“In short, we don’t see the mid-2020 volume recovery driven enthusiasm for rails as wrong … just a few months early.”

CSX is scheduled to report its fourth-quarter earnings after the stock market closes Thursday afternoon. 

The company has been forecasting final 2019 revenue will be slightly lower than 2018 and as the first major railroad to report yearned results, Wall Street will be looking for signals on the outlook for 2020.

Majors doesn’t expect the earnings report to move the stock.

“To be clear, we are not suggesting investors absolutely must buy ahead of the quarter,” with expectations of “a characteristically conservative 2019 outlook from management to kick off rail earnings season,” he said.

“We just see the upside potential of holding CSX into 2021 as far greater than the downside risk of holding shares into (the report), given already cautious sentiment and discounted valuation.”

What once was Drone Aviation now based in Dallas

After merging with Jacksonville-based Drone Aviation Holding Corp., ComSovereign Holding Corp. now is headquartered in Dallas, according to a Securities and Exchange Commission filing last week.

Before the merger in December, ComSovereign’s address was listed in Tucson, Arizona, and the companies did not say where the merged company’s headquarters office would be.

The company began trading Jan. 13 under a new ticker symbol, “COMS,” in the OTC market. The stock had continued to trade under Drone Aviation’s “DRNE” symbol for the past month while it waited for approval of a new symbol.

Drone Aviation produced tethered aerial monitoring and communications platforms.

ComSovereign, a holding company for several businesses before the merger, describes itself as a “pure-play communications provider able to provide LTE Advanced and 5G-NR telecom solutions to network operators and enterprises world-wide.”

Drone Aviation technically was the surviving company in the merger, but the owners of privately held ComSovereign ended up with 69% of the company’s shares in the deal and the merged company took on the ComSovereign name.

Shoreline Equity Partners raises $300 million

Jacksonville-based Shoreline Equity Partners last week said it has raised $300 million for its inaugural private equity fund.

Shoreline, which describes itself as “a purpose-driven lower middle market private equity firm,” was launched and began raising capital in March 2019.

The firm was founded by Michael Hand, who previously ran a private equity affiliate of PNC Financial Services Group, and Peter Franz, former co-managing partner of Florida Capital Partners.

Shoreline is targeting businesses with enterprise value between $25 million and $250 million, and will seek to make equity investments of up to $100 million per transaction.

Regency, CSX make Newsweek’s ‘responsible’ list

Two Jacksonville-based companies made Newsweek magazine’s list of “America’s Most Responsible Companies.”

Regency Centers Corp. ranked 165th on Newsweek’s list of 300 companies and CSX ranked 169th.

The magazine looked at the 2,000 largest U.S. companies by revenue and evaluated each on environmental, social and corporate governance responsibility to come up with its ranking.

The rankings were based on publicly available performance indicators and a survey on the public perception of the companies.

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