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Jax Daily Record Monday, Feb. 4, 201312:00 PM EST

Uncertainty pervades corporate earnings outlook

by: Mark Basch Contributing Writer

As more companies report their year-end financial results and their outlook for 2013, there seems to be a recurring theme: uncertainty.

Several CEOs said last week that it's difficult to make forecasts for this year's earnings because of the uncertain outlook for the U.S. economy, as well as U.S. fiscal policy.

For example, Landstar System Inc. takes a generally proactive approach to forecasting earnings, not only issuing guidance at the beginning of every quarter but also conducting a midquarter conference call to update investors on its progress.

However, when the Jacksonville-based trucking company held its conference call last week to review its fourth-quarter results, CEO Henry Gerkens was hesitant to predict the future.

"GDP and industrial production forecasts were for slower growth in the first half of 2013 and better growth in the back half of 2013," Gerkens said.

"If forecasts are correct, load volume should begin to stabilize as we move through the first quarter and the balance of the year. But before I provide specific 2013 revenue and earnings guidance, I want to see evidence that the economy will indeed show improvement as per forecasts," he said.

Gerkens said his "best estimate" is that first-quarter results will be similar to last year.

Dahlman Rose & Co. analyst Jason Seidl said the lack of a forecast isn't a red flag for the company.

"We are not too concerned about the lack of guidance because it is not indicative of operational issues at the company, but is rather largely attributable to Landstar's caution about the overall truckload market, which we believe will start showing signs of improvement in 2013 as capacity tightens and the housing recovery continues," Seidl said in a research note.

Landstar reported fourth-quarter earnings of 73 cents a share, but that included 8 cents in gains from a tax benefit. Its adjusted earnings of 65 cents a share were in line with the company's forecast range of 63 cents to 68 cents, but lower than the average analysts' forecast of 67 cents, according to Thomson Financial.

"Revenue for the 2012 fourth quarter finished a little shy of our internal expectations as December load volume was a bit lower than our expectations," Gerkens said.

"It is rare that the company's results are slanted towards the lower end of the guidance range endorsed during its traditional midquarter conference call. This suggests that December did not pack much wallop and that freight markets remain lackluster," Stifel Nicolaus analyst John Larkin said in a research note.

Landstar's stock fell $1.32 to $57.04 on Thursday after the earnings report.

Budget uncertainty affects Northrop

One company that faces perhaps more uncertainty than others is defense contractor Northrop Grumman Corp., which employs about 1,000 people at its aerospace facility in St. Augustine.

Northrop last week reported higher fourth-quarter earnings that beat analysts' expectations, but the company's 2013 outlook is clouded by the ongoing debate over the U.S. government's budget.

The company said fourth-quarter earnings from continuing operations rose 2 percent to $2.14 a share, well above the average analysts' forecast of $1.74, according to Thomson.

Earnings for all of 2012 rose 5 percent to $7.81. However, Northrop is forecasting 2013 earnings to drop to $6.85 to $7.15 a share.

"Looking ahead, I can't recall a time of greater uncertainty regarding customer funding levels or government fiscal policy," CEO Wes Bush said in Northrop's quarterly conference call.

Bush said he is optimistic about Northrop's future even if it sees a big drop in defense spending by the federal government.

"While we don't have control over these issues and can't predict their ultimate resolution, I believe the work we've done over the last several years on performance, as well as our strong balance sheet, leaves us well prepared for a likely defense spending downturn," he said.

Regency beats forecasts

Regency Centers Corp. last week reported fourth-quarter core funds from operations of 63 cents a share, equal to the fourth quarter of 2011 but 4 cents higher than the average analysts' forecast, according to Thomson.

Funds from operations, which are basically earnings excluding depreciation and amortization expense, are considered the key measure of a real estate company's performance.

Regency reported a final net loss for the quarter of 41 cents a share, due to a writeoff associated with one of its shopping centers in Las Vegas.

For all of 2012, Regency's core funds from operations rose by 16 cents a share to $2.56. The Jacksonville-based company, which owns all or part of 348 shopping centers nationwide, said occupancy at its properties was 94.4 percent at the end of the year.

However, CEO Hap Stein said in Regency's conference call that there are concerns about 2013.

"To be sure, we recognize that a single year's positive results do not define Regency's standard for success. This is particularly the case in light of our view that economic growth, while positive, will likely be slow for the foreseeable future, and our tenants will continue to operate in an increasingly competitive environment," he said.

"That said, it is worth noting that 2013 will be Regency's 50th year in business. Our experience over the last five decades has molded and enhanced, what I am convinced, is a tried and true formula that will sustain growth and shareholder value," he said.

Regency explains social media disclosure

Last week, I told you that Regency had to file a Securities and Exchange Commission report to disclose information about the company that came out via social media.

The company didn't say what form of social media was involved. However, Patrick Johnson, vice president of capital markets and joint venture portfolio management, explained that the disclosure was a tweet from an employee.

Johnson said when company officials realized the information came out, they issued the SEC filing as a precautionary measure.

It's surprising that this kind of issue doesn't come up more often in today's world. Public companies are going to have to monitor employees' social media accounts to make sure material information is not inadvertently released.

EverBank finishes strong

EverBank Financial Corp. finished its first year as a public company strong, with adjusted earnings for the year growing by 33 percent to $143.4 million.

Adjusted fourth-quarter earnings of 34 cents a share were a penny higher than the average analysts' forecast, according to Thomson.

"We are pleased with our results for the quarter and the year, which demonstrate our unique ability to generate robust asset and deposit growth," CEO Robert Clements said in the company's conference call Thursday.

The Jacksonville-based banking company grew its total assets by 40 percent during the year to $18.2 billion. Clements said that was helped by the company's acquisition of commercial real estate loan company Business Property Lending Inc., and also by organic growth.

After going public at $10 a share last May, EverBank has been trading near $15 recently. Keefe, Bruyette & Woods analyst Jefferson Harralson thinks the latest earnings report will help the stock go higher.

"We believe the market will like the increased mortgage profitability, the more robust total originations, and the significantly higher run rate of earnings with the materialization of the BPL EPS accretion," Harralson said in a research note.

Harralson has an "outperform" rating and an $18 price target for the stock.

Banks regain Nasdaq standing

The other two publicly traded banking firms headquartered in Jacksonville are back in good standing with Nasdaq after a recent surge in their stock prices.

Both Atlantic Coast Financial Corp. and Jacksonville Bancorp Inc. said in SEC filings last year that they were in danger of losing their Nasdaq listings because of the low market price of their shares. But in the past week, both companies indicated in SEC filings that they are back in compliance with Nasdaq rules to maintain their listings.

Atlantic Coast Financial said it received a letter from Nasdaq stating that it was in compliance because the total market value of its publicly traded shares was greater than $5 million for at least 10 consecutive business days.

The company's stock has risen from $2.01 at the end of December to above $3.50 last week.

Jacksonville Bancorp said it received approval to transfer its stock listing from the Nasdaq Global Market to the Nasdaq Capital Market.

Nasdaq has three tiers of listings, with the "Global Select" market being the highest level, followed by the Global Market and the Capital Market.

Although the Capital Market is the lowest level, moving to that tier shouldn't really have an impact on the stock. Jacksonville Bancorp still trades under the ticker "JAXB."

Jacksonville Bancorp's stock closed 2012 priced at just 80 cents, but it rose above $3 last week.

FIS buying payment technology company

Fidelity National Information Services Inc. (FIS) last week announced it is paying about $120 million in cash to buy the remaining 78 percent of California-based mFoundry, which provides mobile banking and payment technology for banks and retailers.

Jacksonville-based FIS, which provides technology services for banks, already owns 22 percent of mFoundry. The company said in a news release that acquiring the rest of mFoundry "enables FIS to leverage its technology assets across a broader client base."

FIS expects to close the deal by the end of the first quarter.

AutoNation goes to single brand

AutoNation Inc. last week announced that it is changing the brand name of its 210 domestic and import car dealerships, including five Mike Shad dealerships in the Jacksonville area, to the single "AutoNation" brand.

"The launch of the AutoNation brand unifies us under one flag, AutoNation, rather than as local market brands. We have worked to provide a peerless customer experience across the enterprise," CEO Mike Jackson said in a news release.

AutoNation also reported fourth-quarter earnings rose 31 percent to 67 cents a share and while other CEOs were expressing caution last week, Jackson is optimistic about another good year in 2013.

"We are looking forward to a robust new vehicle selling environment in 2013," he said.

AutoNation's stock jumped as much as $3.81 to a record high $48.56 Thursday after the Fort Lauderdale-based company's announcements.

Analyst downgrades Rayonier stock

Rayonier Inc.'s stock reached a record high of $56.78 on Jan. 24 after the Jacksonville-based forest products company reported a 25 percent increase in fourth-quarter earnings. But one analyst thinks the stock has gone far enough.

Rayonier has "a great business model and management team, but the valuation seems full," RBC Capital Markets analyst Paul Quinn said in a research note as he downgraded the stock from "outperform" to "sector perform."

"We still believe there is a compelling long-term (24-36 month) investment thesis in Rayonier," Quinn said. However, he sees more upside in other companies in 2013.

ADT reaches new high

ADT Corp.'s stock reached a new high last week after reporting better-than-expected earnings and an accelerated share repurchase program.

The Boca Raton-based security company, which employs about 2,000 people in Jacksonville, said earnings in the first quarter ended Dec. 28 rose 13 percent to $105 million, or 44 cents a share. That was a penny higher than the average analysts' forecast, according to Thomson.

ADT also announced an accelerated plan to buy back $600 million of its stock from Credit Suisse International.

ADT's stock jumped as much as $2.59 to $49.10 on Wednesday after the announcements, the highest level since ADT was spun off in October from Tyco International Ltd. ADT's stock opened at $37.18 on Oct. 2 when trading began after the spinoff.

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