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Jax Daily Record Thursday, Nov. 21, 201905:10 AM EST

Struggling Maxwell House parent downgraded

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Reports said Kraft Heinz Co. was trying to sell the coffee brand that is produced in Downtown Jacksonville.
by: Mark Basch Contributing Writer

Months after financial news reports that Kraft Heinz Co. was considering a sale of its Maxwell House coffee brand, the struggling food retailer hasn’t commented on the possibility.

However, one analyst last week said Kraft Heinz is still evaluating several business units for a possible sale.

“KHC continues to execute a deep assessment of its brands and the segments it competes in as part of its longer-term strategy,” Goldman Sachs analyst Jason English said in a report as he downgraded Kraft Heinz’s stock from “neutral” to “sell.”

Several reports last winter and spring said Kraft Heinz was trying to sell its Maxwell House coffee brand but was unable to find a buyer.

The company’s iconic Downtown Jacksonville facility at 735 E. Bay St., which employs about 200 people, is the last remaining Maxwell House plant in the U.S.

The plant has been operating at that location since 1924.

English said he is taking no position on divestitures. But at a meeting in September, “management acknowledged that some brands and segments could be too expensive to turn around, and expressed some willingness to dispose of such businesses if it determines that any parts of its portfolio fall into this bucket.”

During Kraft Heinz’s third-quarter conference call with investors last month, management “highlighted that it is exploring areas of its products or categories that could fit better with a different company,” English said.

English projects the company’s coffee business, which includes the Gevalia brand, will produce $1 billion in sales in 2020, or 5.2% of total Kraft Heinz sales.

Downtown Investment Authority CEO Lori Boyer confirmed in a phone call Nov. 7 that she had a teleconference with Kraft Heinz representatives in October, but she declined to comment about the subject of the meeting.

SunTrust-BB&T merger impact on city still unclear

Before their planned merger, SunTrust Banks Inc. and BB&T Corp. resolved antitrust concerns by agreeing to divest 30 branches in Georgia, Virginia and North Carolina.

However, the two banks have still not decided on possible office closings in the Jacksonville market related to the merger, which is expected to be completed Dec. 6.

Atlanta-based SunTrust and Winston-Salem, North Carolina-based BB&T are merging into a new company called Truist Financial Corp., which will be headquartered in Charlotte, North Carolina.

The U.S. Department of Justice announced Nov. 8 the two banks agreed to sell 28 branches, which it said is the largest divestiture in a bank merger in the past decade.

As it turned out, the two banks announced a deal to sell 30 SunTrust branches with $2.4 billion in deposits to First Horizon National Corp.

The nearest branch to Jacksonville in that deal is in Jesup, Georgia.

The two banks combined have 33 branches in the Northeast Florida market, according to the latest Federal Deposit Insurance Corp. data, and both have offices in Downtown Jacksonville.

A SunTrust spokesman said last week the companies have made no decisions on what will happen to Jacksonville area offices after the merger, and any future branch closings would not be related to the agreement with the Justice Department.

The merger was approved Tuesday by the FDIC and the Federal Reserve Board.

CSX downgraded on coal outlook

Deutsche Bank analyst Amit Mehrotra last week downgraded his rating on CSX Corp., saying the continuing decline in coal shipments will impact the Jacksonville-based railroad company’s earnings.

Coal shipments have historically been CSX’s biggest business but lower demand has significantly cut its coal volume in the past decade.

Despite “superhuman” efforts to improve profit margins with cost cutting and efficiency initiatives, Mehrotra said the continued drop in coal will make it difficult for CSX to improve earnings, so he downgraded the stock from “buy” to “hold.”

“We’d characterize this downgrade as specific to the Eastern rails given exposure to export-coal markets,” Mehrotra said in a research note.

“And while we’ve been cautious on Norfolk Southern Corp. for some time, we are now turning neutral on CSX after significant outperformance over a several year period, and near-term risks related to above-mentioned coal headwinds,” he said.

Beyond the coal business, Mehrotra thinks the railroad industry has a strong outlook.

“To be sure, we remain positive on U.S. Transportation equities in 2020, where we have presented our view that low interest rates, lower price of risk/equity risk premium, and reaccelerating growth expectations are a powerful combination that should drive considerable multiple expansion (and we believe will lead to some period of ‘rational exuberance’ for U.S. Transportation equities next year),” he said.

Cannae invests in health care

Cannae Holdings Inc., the investment company spun off from Fidelity National Financial Inc., announced a plan last week for a health care joint venture.

The joint venture, which includes an affiliate of The Carlyle Group, seeks to acquire “synergistic health care services companies in the provider and payer space,” Cannae said in a news release.

Cannae will be a minority shareholder in the joint venture. The company will contribute its T-System business, which provides health care documentation services, as part of the joint venture.

Cannae has investments in a diverse array of companies including business data firm Dun & Bradstreet Corp. and several restaurant chains.

Cannae is headquartered in Las Vegas but is run by executives affiliated with Jacksonville-based Fidelity.

Revenue jumps at Drone Aviation

Drone Aviation Holding Corp. recorded third-quarter earnings of $574,296, or 2 cents a share.

Revenue for the Jacksonville-based company, which produces tethered aerial monitoring and communications platforms, jumped from $84,815 in the third quarter of 2018 to $2.7 million this year.

Drone Aviation said the improvement reflects delivery of new systems to customers including the U.S. Army and additional deliveries in support of the U.S. Border Patrol.

Dick’s Wings owner reports loss

ARC Group Inc., owner of the Dick’s Wings & Grill restaurant chain, reported a net loss of $597,514, or 8 cents a share, for the third quarter.

Revenue rose 71% to $4.04 million, due largely to the acquisition last year of the four-restaurant Fat Patty’s chain. Jacksonville-based ARC Group also said revenue grew at the 20-restaurant Dick’s Wings chain.

After the third quarter ended, ARC Group acquired the WingHouse Bar & Grill restaurant chain. The 24 WingHouse restaurants produced $60.6 million in revenue last year, the company said.

ParkerVision still hopeful on lawsuits

Jacksonville-based ParkerVision Inc. last week reported a third-quarter loss of $2.1 million, or 7 cents a share, with minimal revenue.

The developer of wireless technology is no longer pursuing development of products and is focused instead on several pending lawsuits against major communications manufacturers. ParkerVision alleges those companies have infringed on the company’s patents in their products.

“We are fortunate to have received tens of millions of dollars in support from third-party funders, our litigators and our shareholders to defend our patents,” CEO Jeff Parker said in a news release.

“Our goal continues to be the recovery of fair compensation from those who are benefiting from our discoveries,” he said.

Project delays affect Duos Technologies

Jacksonville-based Duos Technologies Group Inc. last week reported a net loss of $1.1 million, or 4 cents a share, for the third quarter, with revenue dropping 57% to $2.2 million.

The company said the decrease in revenue was caused by shifts in the timing of projects, because of customer construction delays. However, the provider of analytical technology solutions said those delays will not affect results for the full year.

Duos Technologies is still expecting full-year revenue of $13.5 million to $14 million, up from $12 million in 2018, and is forecasting revenue to grow to $20 million in 2020.

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