The Basch Report: Brown won’t address Web.com takeover rumors
Over the last two months, market rumors surfaced that Web.com Group Inc. had talked to private equity firms about a possible buyout, talks that have apparently cooled off (according to the rumor mill).
Not surprisingly, Web.com CEO David Brown didn’t bring up the topic during the Jacksonville-based company’s quarterly earnings conference call last week. But of course, an analyst asked Brown to comment on it.
“I think it’s worth noting that we’ve always been open to whatever would build long-term shareholder value, whatever maximizes our shareholders’ interests and we’ve said numerous times and continue to say that we talk to lots of people from strategic to financial players in the market. There are many reasons to talk to them.”
He said those reasons include acquisition opportunities for Web.com, which it has used a number of times to expand over the years.
The market buzz, which did prompt a spike in Web.com’s stock in late May, was that buyout firms had approached the company, but Web.com was not actively seeking a buyout.
Web.com, which mainly provides website development services for businesses, reported net income of 16 cents a share for the second quarter, reversing a loss in the second quarter of 2016.
The company is emphasizing earnings before interest, taxes, depreciation and amortization (EBITDA) as its primary earnings metric.
Web.com said its adjusted EBITDA in the quarter was $48.2 million, above its forecast range of $46 million to $48 million.
“The company has made significant strides from where we were a year ago,” Brown said. “We’re at a stage where the business has stabilized and is growing.”
Rayonier AM sees more value in Tembec deal
During Rayonier Advanced Materials Inc.’s quarterly conference call last week, CEO Paul Boynton said the company increased its offer to buy Tembec Inc. because it sees increased value in the deal.
“We have spent significant time with the Tembec team performing integration planning,” he said.
“Based on these discussions, our perspective is that the value of the Tembec combination has increased.”
What Boynton didn’t discuss was that Tembec’s two largest shareholders had pledged to vote against Rayonier AM’s original cash and stock offer valued at $807 million. That would have killed the deal.
However, Rayonier increased the value of the offer two weeks ago by 8 percent, Boynton said, and Tembec shareholders approved it at their July 27 meeting.
The merger of the two cellulose specialty products companies is expected to expand Rayonier AM’s operations geographically, because of Montreal-based Tembec’s operations overseas.
Boynton said the deal has received antitrust clearance from U.S. and German officials, but still needs approvals from Canada and China.
The companies hope to complete the merger this fall.
Jacksonville-based Rayonier AM reported second-quarter adjusted earnings of 11 cents a share, down from 46 cents the previous year.
Rayonier Inc. moves in to Wildlight
Rayonier Inc. expects to complete the consolidation of its headquarters and two other offices this month into the company’s new Wildlight development in Nassau County, CEO David Nunes said during the company’s conference call.
Rayonier said a year ago it expects to move 145 employees from the three offices, including its Downtown Jacksonville headquarters, into the 55,000-square-foot building near the intersection of Interstate 95 and Florida A1A.
Nunes said 100 employees already have moved in after the company got its certificate of occupancy June 1, and the rest should move by mid-August.
Besides its headquarters, a new elementary school will open in the mixed-use community this week, he said.
“Wildlight’s an important catalyst for unlocking the value potential of our land holdings in Northeast Florida and we’re very pleased with our progress to date on this project,” he said.
Rayonier reported second-quarter earnings of 20 cents a share, up from adjusted earnings of 7 cents a year ago and well above analysts’ forecasts, which ranged from 9 cents to 12 cents, according to Yahoo Finance.
The timber and real estate company increased earnings despite losses from the West Mims fire in Georgia and Florida, which damaged about 6,000 acres of Rayonier land. The company said it incurred $1.1 million in costs related to the fire during the second quarter.
Analysts differ on Landstar
Two analysts last week took very different views on Jacksonville-based trucking company Landstar System Inc.
Deutsche Bank analyst Amit Mehrotra downgraded Landstar from “buy” to “hold” as part of an overall downgrade of “industrials-focused transportation companies.”
“Landstar has been one of our favorite under-the-radar stocks within our coverage universe. But the company’s significant exposure to U.S. industrial activity (via its flatbed business which accounts for about 30 percent of gross revenue), gives us reason for pause in the second half and 2018,” Mehrotra said in his research note.
However, Stifel analyst John Larkin upgraded Landstar from “hold” to “buy,” with an opposite view of the industrial outlook.
“Industrial has been a big tailwind for Landstar throughout 2017 and that trend is expected to continue through the second half of 2017,” Larkin said in his note.
“We believe the stock will likely perform as supply and demand once again tighten around the truckload market and as the return to legacy core strategy generates additional organic momentum. Large flatbed and heavy-haul capabilities position the company well for America’s industrial renaissance,” he said.
Mehrotra had one other interesting view in his report on transportation stocks.
“The only rail company we (still) have a Buy rating on is CSX Corp., reflecting outsized earnings and cash flow growth opportunities from new management’s aggressive restructuring,” he said.
FRP Holdings still waiting on tax policy
FRP Holdings Inc. has been considering converting the commercial development company to a real estate investment trust, which pays out most of its earnings to shareholders as dividends.
However, during the company’s quarterly conference call last week, CEO John Baker said FRP is still waiting to see if any changes are coming to corporate tax laws.
“At this point we’re waiting to see if our government chooses to lower corporate taxes this year,” he said.
Lower corporate taxes could make it less advantageous to convert to a REIT.
Baker is hoping FRP can announce a decision in November, but it could delay it further if the federal government waffles on tax policy.
FRP reported second-quarter earnings of 17 cents a share, up from 8 cents the previous year.
The big increase was mainly the result of $2 million in environmental remediation expenses incurred last year.
Baker said earnings excluding special items were “basically flat.”
Revenue in the quarter rose 1.3 percent to $9.4 million.
FIS tops estimates, raises forecast
Fidelity National Information Services Inc., or FIS, reported better-than-expected second-quarter earnings.
Adjusted earnings from continuing operations of $1.02 a share were 12 cents higher than last year and 7 cents higher than the average analyst’s forecast, according to Yahoo.
“We concluded the first half of the year with another strong quarter for FIS and our shareholders and because of our overall strong performance, we are raising our full-year earnings per share guidance,” CEO Gary Norcross said in the company’s conference call.
Jacksonville-based FIS, which provides technology for financial institutions, now expects adjusted earnings of $4.22 to $4.32 a share for 2017, up from its previous forecast range of $4.15 to $4.30.
Advanced Disposal earnings up
Advanced Disposal Services Inc. reported second-quarter adjusted earnings of 16 cents a share, 6 cents higher than last year. Revenue for the Ponte Vedra-based company rose 7 percent to $383.1 million.
“Advanced Disposal continues to attain significant year-over-year improvements in cash from operations and adjusted free cash flow as we execute on our strategy,” CEO Richard Burke said in a news release.
“At the same time, we have found profitable opportunities to reinvest in our business along with achieving organic growth that has driven strong-year-over-year revenue gains,” he said.
FirstAtlantic earnings flat
FirstAtlantic Financial Holdings Inc.’s second-quarter earnings of 17 cents a share were unchanged from the 2016 second quarter, but net income did rise by 2 percent to $1.064 million.
The parent company of FirstAtlantic Bank increased net interest income, but said non-interest income was lower because of a gain in 2016 on a sale of investment securities.