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Basch Report
Jax Daily Record Thursday, Jan. 31, 201905:20 AM EST

The Basch Report: A look at Jacksonville’s eye care business giant

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If Johnson & Johnson Vision Care Inc. was an independent company, it would be one of the largest headquartered in the city.
by: Mark Basch Contributing Writer

Since it’s not an independent company, Johnson & Johnson Vision Care Inc. may not get its due as one of the largest companies headquartered in Jacksonville.

But after expanding beyond its traditional contact lens business with acquisitions of other eye health businesses, the company reported 2018 sales last week that would have made it one of the largest corporations in the country.

As parent company Johnson & Johnson reported year-end results, it said global revenue from its vision care unit jumped 12.1 percent to $4.55 billion.

If it was an independent company, that total would have been good for 555th on Fortune magazine’s list of largest U.S. companies last year.

The growth is due in part to the acquisitions that expanded the eye care business in 2017 but its contact lens business grew sales by 8.8 percent to $3.3 billion in 2018.

Johnson & Johnson has operated the contact lens unit since 1981 when it acquired a Jacksonville company called Frontier Contact Lenses, a business founded in 1959.

The business was renamed Vistakon and operated under that name for three decades before the company transitioned to the Johnson & Johnson Vision Care name.

The company employs about 1,800 people in Jacksonville.

In Johnson & Johnson’s quarterly conference call last week, officials said demand for contact lenses remains strong despite flat U.S. sales in the fourth quarter.

“The U.S. continues to experience high consumption,” said Christopher DelOrefice, vice president of investor relations.

“However, sales were basically flat due to year-over-year inventory dynamics. Contact lenses have now grown at or above the market for three consecutive years,” he said.

The only Jacksonville-based companies with higher reported sales than Johnson & Johnson Vision Care are the city’s three Fortune 500 companies: CSX Corp., Fidelity National Financial Inc. and Fidelity National Information Services Inc.

Southeastern Grocers, operator of Winn-Dixie and three other supermarket chains, also likely has higher sales but as a private company, it does not publicly report financial results.

New Jersey-based Johnson & Johnson, which ranked 37th in last year’s Fortune 500, said total 2018 revenue rose 6.7 percent to $81.6 billion.

Ameris earnings put bank on track

Ameris Bancorp’s stock tumbled in December after announcing a big acquisition, but the stock seems back on track after a positive fourth-quarter earnings report Friday.

The bank which has its executive offices in Jacksonville reported adjusted earnings of 96 cents a share, up from 63 cents the previous year and 3 cents higher than the average analyst’s forecast, according to Zacks Investment Research.

Analysts said the earnings report reiterated their positive view on the company.

“We maintain our Overweight rating on Ameris following what we thought were strong fourth-quarter results and continue to view the stock as overly attractive considering its peer leading and accelerating profitability profile, particularly relative to its current valuation at just 7.6 times our 2020 EPS estimates of $4.80,” Stephens analyst Tyler Stafford said in a research note.

Ameris’ stock fell to a 52-week low in December after announcing a deal to buy Atlanta-based Fidelity Southern Corp. for $751 million in stock. 

But the stock has recovered after bottoming out last month at $29.97 and rose $1.24 to $36.51 Friday after the earnings report.

“In general, we think the outlook is solid for EPS growth to be double digit with full realization of cost savings, a key driver to profitability and efficiency improvement,” Piper Jaffray analyst Brett Rabatin said in his research note.

“Overall we like the geographic expansion and believe that the long-term story remains too underappreciated by the market given the current valuation,” he said.

Keefe, Bruyette & Woods analyst Brady Gailey said in his note that Ameris “remains a top idea” as he reiterated his “outperform” rating on the stock.

“Ameris is set up nicely for 2019 as it looks to capitalize on its $20 million cost reduction plan and begin the integration process of its Fidelity acquisition,” Gailey said.

“The company is optimistic on the growth front as well projecting $1 billion of loan growth and double-digit deposit growth for 2019,” he said.

International Baler earnings rise

International Baler Corp. filed its annual report Monday showing sales rose 5.9 percent in the fiscal year ended Oct. 31 to $11.1 million.

The Jacksonville company, which makes baling equipment used for waste disposal and recycling, reported net income of $310,229 for the fiscal year, or 6 cents a share, up from $73,360 or 1 cent a share in fiscal 2017.

Mantle Ridge sells $305 million in CSX stock

Hedge fund Mantle Ridge LP, which backed a management upheaval at CSX two years ago, sold several large blocks of stock last week in the Jacksonville-based railroad company.

According to Securities and Exchange Commission filings, Mantle Ridge sold a total of 4.7 million shares at prices ranging from $64.23 to $65.83 a share. The total value of the sales was $304.6 million.

Mantle Ridge still controls about 38 million shares of CSX, which had average outstanding shares of 861 million last year.

Mantle Ridge teamed with the late Hunter Harrison to push for Harrison’s hiring as chief executive of CSX. Harrison was appointed CEO in March 2017 as part of an overhaul of management and the board of directors.

CSX rival Norfolk is downgraded

One analyst Friday downgraded CSX’s main rival, Norfolk Southern Corp., saying Norfolk Southern may have more difficulty than CSX in implementing a new operational plan.

CSX two years ago began implementing precision scheduled railroading, an efficiency plan championed by Harrison and his successors after Harrison died in December 2017.

After a bumpy start with complaints from customers about poor service, CSX improved last year and achieved an operating ratio (expenses divided by revenue) of 60.3 percent.

By contrast, Norfolk Southern, which competes with CSX for railroad service in the eastern U.S., had an operating ratio of 65.4 percent.

With Norfolk Southern’s efficiency trailing CSX, Deutsche Bank analyst Amit Mehrotra downgraded the stock from “buy” to “hold” after Norfolk Southern’s earnings report last week.

“The bear argument is that NSC is likely to see market share losses to CSX as it implements PSR — as CSX has improved service and reduced costs,” Mehrotra said in a research note.

Mehrotra is pessimistic about Norfolk Southern’s opportunity for improvement as it moves forward with precision scheduled railroading.

“PSR takes a strong sense of urgency to radically change the business — something we have not seen from NSC management (not yet, at least). And is harder to implement in an environment of slowing growth, little previous PSR experience, and a formidable direct competitor that is much further along in the process,” he said.

Bank group invests in Jacksonville tech company

Finxact, a Jacksonville-based bank technology company, said Friday it raised $30 million in equity financing from a group of investors including the American Bankers Association, the major trade group for the U.S. banking industry.

The ABA said it made the investment as part of a program to help banks find the technology and tools needed to meet customer demands in a digital future.

“We started Finxact in the beginning of 2017, and we have focused on building a banking system of record that can effectively replace legacy core systems and also serve as a platform for rapidly evolving digital banking requirements,” CEO and founder Frank Sanchez said in a news release.

Other new investors in this round of financing included Accenture Ventures and SunTrust Bank, the company said.

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