Twitter can be troublesome if used incorrectly. Last week, it forced CSX Corp. to scramble its plans to release second-quarter earnings.
Jacksonville-based CSX was planning to release the numbers shortly after the stock market closed at 4 p.m. Wednesday, as per its usual practice.
The company follows the late afternoon earnings release with an early morning conference call with analysts the next day, before the market opens at 9:30 a.m.
Most companies do something similar, releasing and discussing earnings reports when the market is closed so investors have an opportunity to digest the information before the stock begins trading on it.
However, CSX sent an inadvertent tweet about earnings at 2 p.m. Wednesday that forced a change in plans.
Because of concerns that the market might act on information in the tweet, CSX took the unusual step of releasing its full earnings report early at about 3 p.m., while the market was still open.
The news was good — CSX’s earnings of 47 cents a share were 9 cents lower than the second quarter of 2015 but 3 cents higher than the average forecast of analysts, according to Thomson Financial. So CSX’s stock jumped up in the final hour of trading Wednesday.
The stock had been meandering close to Tuesday’s closing price of $27.02 all day but after the earnings beat was revealed, it finished Wednesday at $28.21, up $1.19 on the day.
CEO Michael Ward told the Daily Record he didn’t think the early release had an impact on the stock because it would have gone up anyway after the results beat analysts’ expectations.
He pointed out the stock rose again on Thursday, reaching a 52-week high of $29.41, and the overall gain in the stock was probably the same as it would have been with a normal earnings release.
The Twitter post was immediately deleted Wednesday and Ward didn’t think it had an impact at all, because the stock really didn’t move between 2 p.m. and 3 p.m., when the actual release came out.
The company might have been able to wait until 4 p.m., but thought it best to get the actual numbers out.
“We just did it on the side of caution,” Ward said.
Melanie Cost, director of financial and media relations at CSX, said the incident probably won’t spark big changes in the company’s Twitter policy because Twitter is not one of its major tools.
“We don’t release anything via our social media channels that isn’t released on other channels,” she said.
But it should be another cautionary tale to everyone to be careful about that “send” button.
Analyst downgrades CSX after gains
CSX’s rise Wednesday and Thursday prompted one analyst to downgrade his rating on the stock.
“Our rating on CSX’s common shares changes from ‘buy’ to ‘hold’ as we think that the valuation of the company’s shares already reflects a sensible outlook for the company’s performance over the next few years, therefore limiting near term upside potential,” Stifel Nicolaus analyst John Larkin said in a research report Thursday.
“While we still like the company fundamentally, we think the valuation is a touch overextended presently,” Larkin said.
Although he downgraded the stock, Larkin praised CSX management.
“We think that CSX has been the quickest to react to the volume declines and has been the most forthright, amongst the North American railroads, in realizing that the future network must be re-engineered to support the profitable growth of more service-sensitive merchandise carload traffic and intermodal traffic,” he said.
“The steps management is taking should set the company to prosper without the large volumes of low value, commodity carload traffic that heretofore have provided the base load volume for the company,” Larkin said.
RBC Capital Markets analyst John Barnes maintained an “outperform” rating on the stock and raised his price target from $30 to $32 after the earnings report.
“The second-quarter earnings beat underscores CSX’s relative advantage over regional peers to adjust capacity to volumes; realize efficiency gains; and improve business mix, all while maintaining strong pricing,” Barnes said in his report.
Cowen and Co. analyst Jason Seidl maintained a “market perform” rating on the stock.
“CSX’s outlook does not seem to have worsened like we felt it did last quarter. That’s a positive, on the margin,” Seidl said in his report.
CSX is always the first major railroad — and one of the first major corporations in general — to report quarterly results, so analysts are hoping the better-than-expected earnings will be a positive for the railroad industry.
“There are more efficiency gains to be had and headcount reductions coming it seems, but the group’s positive reaction to the second-quarter earnings release suggests these stocks may have found a near-term bottom,” Seidl said.
“We think CSX’s report is a good sign for other rails –– steady pricing, moderating mix headwinds, and strong headcount reductions. And if volumes are bottoming, we think rail valuations can continue to expand,” Wolfe Research analyst Scott Group said in his report, as he maintained a “peer perform” rating.
Hedge fund manager grows Web.com stake
Web.com Group Inc.’s largest shareholder, hedge fund manager Ahmet Okumus, has increased his stake in the company, according to a Securities and Exchange Commission filing last week.
The filing shows Okumus Fund Management Ltd. made a number of share purchases in June that increased his stake in Jacksonville-based Web.com to 9.56 million shares, or 18.8 percent of all outstanding shares.
Web.com’s proxy statement in April showed Okumus with 7 million shares, or 13.8 percent.
Last week’s filing said Okumus acquired the shares “for investment in the ordinary course” of the fund’s investment activities.
Okumus began buying Web.com shares in 2014 after a sharp drop in the price, saying it represented an attractive investment opportunity.
Web.com, which provides website development services for small and medium-sized businesses, fell from the $30s in early 2014 to the teens by the fall after disappointing earnings reports.
Okumus never publicly indicated any disagreement with management but in February 2015, Web.com agreed to add two directors supported by Okumus to its board.
One of those directors, John Giuliani, was re-elected at Web.com’s annual meeting in May.
However, the other, Richard Rudman, did not stand for re-election, according to the proxy. It did not give a reason for Rudman’s departure.
Instead of replacing Rudman, Web.com reduced the size of the board from nine directors to eight. It had increased the board from seven to nine when it agreed to add Okumus’ representatives in 2015.
Analyst downgrades EverBank Financial
Wells Fargo Securities analyst Jared Shaw last week downgraded his rating on Jacksonville-based EverBank Financial Corp., as part of an overall assessment of mid-cap banks readying second-quarter earnings reports.
Shaw downgraded EverBank from “outperform” to “market perform” and lowered his valuation range from $18 to $20 a share to $17 to $18, with the stock trading at $15.19 at the time.
“While we continue to view the current valuation multiple of 9.0x (nine times projected earnings) as low, we acknowledge that EverBank needs to go through an interest rate cycle before investors gain greater comfort with the broader strategy,” Shaw said in his report.
“With the timing of the business model being proved out now extended, we lower our rating to ‘market perform,’ as there is no near-term catalyst to close the valuation gap, in our view,” he said.
Regency Centers drops on stock sale
With its stock trading at its highest level since the Great Recession, Regency Centers Corp. last week sold additional shares of stock, raising capital to pay off debt.
The Jacksonville-based company sold about 5 million shares of stock, reaping proceeds of about $400 million.
However, with the dilutive effect of additional shares of stock in the market, Regency’s stock fell $2.48 to $81.68 Tuesday after announcing the stock sale.
The sale increases the number of Regency shares outstanding to about 103.8 million.
Duos Technologies gets Amtrak contract
Duos Technologies Group Inc. last week said it was awarded several contracts totaling $230,000, including one to provide services to Amtrak.
Jacksonville-based Duos, which provides intelligent analytical technology solutions, said it will be analyzing alert, warning and notification capabilities at five sample Amtrak facilities.
Duos is a small company that is slowly building its business. It reported total revenue of $1 million in the first quarter but also recently announced contracts to provide data center audit services for an unnamed customer that will provide up to $1 million in additional revenue this year.
Kaman contract brings work to area
Kaman Aerosystems last week announced a contract with General Dynamics Mission Systems-Canada that will provide more work at its Jacksonville facility.
Connecticut-based Kaman said the $39.8 million contract is for work on an aircraft program for the Peruvian navy.
Kaman has already recognized $10.6 million in revenue from that program.
Kaman said its Jacksonville facility will provide manufacturing services for the program, which runs through 2018.
Other manufacturing and upgrade work will be done at its Bloomfield, Conn., site and engineering work will be handled by its Everett, Wash., facility.
Kaman announced the contract at the Farnborough International Airshow, a major defense and aerospace industry event in England.
HAECO adding 400 Lake City jobs
Also at the Farnborough show, Gov. Rick Scott announced plans by HAECO Americas to add 400 jobs at its Lake City aircraft maintenance facility.
HAECO is an acronym for Hong Kong Aircraft Engineering Co. It’s a publicly traded company on the Hong Kong Stock Exchange.
HAECO Group’s U.S. operations are headquartered in Greensboro, N.C., and the Lake City facility is one of eight other U.S. locations.
Representatives at the company’s Lake City and Greensboro offices said they could not provide information on how many employees HAECO has in Lake City.
The Columbia County Chamber of Commerce lists HAECO as one of the county’s largest employers with 630 people.
Scott attended the Farnborough show to promote Florida’s aerospace industry.
GEE Group name change takes effect
General Employment Enterprises Inc. shareholders last week approved the name change of the company to GEE Group Inc., and the company said in an SEC filing the name change takes effect today.
GEE Group is headquartered in Naperville, Ill., but the staffing company is run by Jacksonville executive Derek Dewan, who became CEO when General Employment acquired Jacksonville-based Scribe Solutions Inc. in April 2015.