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Basch Report
Jax Daily Record Thursday, Apr. 29, 202105:10 AM EST

Wall Street welcomes Treace Medical; Landstar earnings nearly double

The surgical devices company is the second Jacksonville company this year to jump after its IPO.
by: Mark Basch Contributing Writer

For the second time this year, a Jacksonville area company soared higher after its initial public offering hit the market.

Treace Medical Concepts Inc. rose $8.53 to $25.53 on its first day of trading April 23, after its IPO of 11.25 million shares was priced at $17. It kept rising this week and reached a high of $34.47 April 27.

That follows Dream Finders Homes Inc.’s IPO of 9.6 million shares at $13 each, which jumped $7.95 to $20.95 on its first trading day Jan. 21 and eventually peaked at $31.98.

Dream Finders already had a high profile in Northeast Florida before going public, with marketing initiatives including a partnership with the Jacksonville Jaguars.

Ponte Vedra-based Treace Medical, which makes surgical devices for bunion surgery, was less known to the general public but probably had a higher profile on Wall Street before the IPO.

Its founding family had successfully taken a Jacksonville-based medical products company public before.

Founder and CEO John Treace’s uncle, James, started a company called Treace Medical Corp., which merged with Xomed Inc. in 1989 to become Xomed-Treace.

James Treace remained CEO of the company, which was renamed Xomed Surgical Products Inc. and went public with an IPO in 1996.

Medical device giant Medtronic Inc. acquired Xomed, which made surgical instruments for ear, nose and throat doctors, in 1999. 

The ENT business continues two decades later as a Jacksonville-based subsidiary of Medtronic.

Treace Medical’s IPO included 4.27 million shares sold by John Treace, but he remains the largest stockholder with 11.81 million shares, or 26.2% of shares outstanding, according to the company’s latest Securities and Exchange Commission filing.

James Treace is the second largest stockholder with 3.66 million shares, or 8.2%.

Treace Medical sold 6.25 million new shares in the IPO, which brought in net proceeds of $96 million.

Paycor going public

Another company with local ties, Paycor HCM Inc., filed plans April 26 for an IPO.

Cincinnati-based Paycor, which provides payroll and human resources services for businesses, has a Jacksonville customer service center.

Paycor announced plans in late 2019 to expand the Jacksonville office, which employed 90 people. It expected to add up to 130 additional workers at its expanded Southside offices. 

However, most of the company’s employees are working from home because of the COVID-19 pandemic and “we will continue to operate remotely for the foreseeable future,”  the IPO filing said.

The only mention of the Jacksonville office in the filing is in a section discussing risks to its business.

“We have customer service and sales Associates based in or near Jacksonville, Florida, an area that has experienced hurricanes and that faces a threat from hurricanes,” it said.

The filing said Paycor has 1,945 employees, with additional offices in Ohio, Texas and Belgrade, Serbia.

Paycor, which is owned by Apax Partners, reported revenue of $265 million in the nine months ended March 31. The company did not say in the filing how many shares will be sold in the IPO.

Landstar earnings nearly double

Landstar System Inc. reported last week that first-quarter earnings nearly doubled to $2.01 a share, with revenue jumping 39% to $1.29 billion.

The Jacksonville-based trucking company had been forecasting earnings of $1.55 to $1.65 a share for the quarter. 

It said consumer demand for building products, durable goods and smaller e-commerce packages increased van volume, and improvements in the manufacturing sector increased freight delivered by unsided and platform trucks.

“In our view, the overall environment for Landstar is as strong as it’s ever been at any point over the last two decades,” CEO Jim Gattoni said in the company’s quarterly conference call with analysts.

“2021 is setting up to be a record-setting year for Landstar as we look to surpass $5 billion in annual revenue for the first time in our history,” he said.

CSX stock rises despite earnings miss

CSX Corp.’s stock rose to record highs last week after its first-quarter earnings report, despite results below analysts’ expectations.

The Jacksonville-based railroad company’s earnings of 93 cents a share, down from $1 the previous year, were 2 cents lower than the consensus forecast of analysts, according to Zacks Investment Research.

However, the company projected strong revenue growth the rest of this year as the economy improves.

BMO Capital Markets analyst Fadi Chamoun upgraded his rating on the stock from “market perform” to “outperform” after the earnings report.

“CSX’s consistently strong execution, significant cyclical tailwinds (particularly in industrial end markets, which command higher margins and where CSX has significant presence), improving pricing outlook, benign cost inflation, low capital intensity and by extension high free cash flow and ROIC (return on invested capital) expansion, are the fundamental reasons underpinning our upgrade,” Chamoun said in his report.

CSX’s stock rose $4.24 to $102.69 April 21 after the earnings report and reached a high of $103.74 last week.

Chamoun raised his price target for the stock from $95 to $110 in his April 21 upgrade.

He also cited renewed merger speculation among major North American railroads as a reason to upgrade.

Kansas City Southern agreed last month to a $25 billion merger offer from Canadian Pacific Railway but that prompted Canadian National Railway to make a competing $33.7 billion bid.

“CSX is also a desirable M&A target in a transcontinental merger, in our view — a scenario that we believe will increasingly color valuation going forward,” Chamoun said.

Superfit Foods acquired

Muscle Maker Inc. disclosed in a letter to shareholders last week it acquired Superfit Foods LLC, a Jacksonville fresh-prepared meal prep business.

Texas-based Muscle Maker operates healthy eating restaurants under a variety of names.

“Superfit Foods is a perfect example of the accretive businesses we are looking to acquire – it has sustained revenue growth, supports our non-traditional strategy and is a driver to help get the Company to grow through acquisitions rather than just through organic growth,” the company’s letter said. 

“Superfit Foods has experienced significant growth since its inception with revenue increasing by double digits year over year – even during the height of the pandemic. This same pattern of revenue growth continued in Q1, 2021,” it said.

Muscle Maker did not specify sales figures for Superfit but said it produced more than 220,000 fresh-prepared meals last year. It also said the company averaged 8.5 meals per order priced at about $81.70 per order.

The math from those details translates into about $2.1 million in sales for Superfit last year.

Muscle Maker reported total 2020 revenue of $4.7 million.

Mortgage business helps Ameris

Ameris Bancorp reported adjusted first-quarter earnings last week of $1.66 a share, up from 56 cents the previous year.

Ameris benefited from increased mortgage banking activity, with low interest rates sparking that business.

The company also said a reduction in credit losses helped its earnings.

Ameris is headquartered in Atlanta after moving its executive offices from Jacksonville in 2019. 

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