Rayonier Advanced Materials Inc. reported disappointing earnings in its first quarter as an independent company, sending its stock to its lowest level since it was spun off from Rayonier Inc.
The company’s pro forma third-quarter earnings (adjusted for the impact of the spinoff) of 53 cents a share were down sharply from 95 cents in the third quarter last year and lower than the average forecast of 66 cents by analysts surveyed by Thomson Financial.
Higher sales were offset by increases in wood and energy costs, as well as corporate expenses as it became an independent company, the company said.
Rayonier AM’s stock fell as much as $3.28 to $27.05 Wednesday after the report before closing the day at $28.39.
Jacksonville-based Rayonier AM, which was spun off from Rayonier Inc. at the end of the second quarter, is the world’s largest producer of cellulose specialty products.
“Being the leader does not insulate us from the realities of the current challenges in the market and, most significantly, oversupply,” CEO Paul Boynton said in the company’s conference call with analysts.
RBC Capital Markets analyst Paul Quinn, who has an “underperform” rating on the company, lowered his price target for the stock from $27 to $23 after the report.
“We see further downside risk to CS prices in 2015 due to excess capacity, slower demand growth and increased competition in the high alpha pulp market. We expect these factors will also limit the company’s ability to grow into complementary specialty chem businesses,” Quinn said in a research note.
D.A. Davidson & Co. analyst Steven Chercover is more optimistic with a “buy” rating, but is also concerned about prices. Rayonier AM’s earnings were actually a penny higher than his forecast of 52 cents a share.
“The fourth quarter should be sequentially stronger due to better mix and volume. The big question mark remains 2015, as cellulose specialty prices could come under pressure,” Chercover said in his report.
Quinn does like the company’s prospects for the long haul.
“Despite our negative outlook on the share price over the next 12 months, we continue to like the long-term fundamentals of the CS business,” he said.
FNFV difficult to evaluate
Another new business, Fidelity National Financial Ventures (FNFV), also reported earnings below forecasts in its first quarter as an independent entity. It seems like it’s going to be very difficult to get a handle on FNFV.
First of all, FNFV is not actually a company. It’s a subsidiary of Jacksonville-based Fidelity National Financial Inc. (FNF) with a tracking stock that trades independently of FNF.
FNFV was created at the end of the second quarter to hold all of the non-real estate business investments of FNF, and the portfolio of businesses in FNFV is a moving target. Much of the focus of its conference call with analysts last week was on its efforts to monetize its various investments. There was little talk of its actual third-quarter earnings of 6 cents a share, which were 9 cents lower than the average analysts’ forecast, according to Thomson.
FNFV’s monetizing efforts include plans announced in September to distribute its stock in auto parts company Remy International Inc. to shareholders. On Tuesday, just a day before announcing its earnings, one of FNFV’s two restaurant companies, J. Alexander’s Holdings Inc., filed plans for an initial public offering.
During the conference call, FNF President Brent Bickett was asked about a possible monetization of FNFV’s other restaurant company, American Blue Ribbon Holdings.
American Blue Ribbon operates several restaurant chains, including O’Charley’s and Village Inn, and is much bigger than J. Alexander’s, with $296 million in revenue in the third quarter. J. Alexander’s had $47 million in revenue.
“We obviously are monitoring and discussing various alternatives there,” said Bickett, but he indicated that American Blue Ribbon’s chains need to improve their performance, particularly O’Charley’s.
“Its margins are still low given the investments we’ve made in the brand,” he said.
Bickett said it will take “a couple of more quarters” before the company could consider an IPO or other monetizing event for American Blue Ribbon.
FNF earnings rise slightly
FNF reported third-quarter adjusted earnings of 51 cents a share, a penny higher than last year.
Revenue in the company’s core title insurance business fell 2 percent to $1.48 billion. In the company’s conference call, Chairman Bill Foley said volume in the title business was stable in the quarter, which allowed FNF to focus on improving its profit margin.
“We continue to believe that we can show further margin improvement in a stable order environment and even higher margins as mortgage credit becomes more readily available and the residential real estate market continues to improve,” he said.
FNF’s mortgage technology business, Black Knight, grew revenue by 11 percent in the quarter to $214 million.
“Black Knight is generating significant momentum,” he said.
FNF’s earnings were 2 cents a share lower than the average forecast of analysts, according to Thomson. However, Piper Jaffray analyst Jason Deleeuw said in a research note that a temporary increase in the company’s tax rate lowered earnings by about 2.5 cents.
“Overall, we view FNF’s third-quarter results as fundamentally solid,” Deleeuw said.
FIS earnings rise
Fidelity National Information Services Inc., or FIS, last week reported third-quarter adjusted earnings increased by 6 cents a share to 80 cents. Revenue for the Jacksonville-based company, which provides technology services for the banking industry, rose 7 percent to $1.6 billion.
“I am pleased to report that the third quarter was another strong quarter for FIS, positioning us well to achieve our full year growth outlook. Our results underscore the strength of our business model and our long-term planned relationships, which drives significant recurring revenue and consistent profitable growth,” CEO Frank Martire said in the company’s conference call.
The earnings report came a week after FIS announced that Martire will retire as chief executive on Jan. 1 and be succeeded by President and Chief Operating Officer Gary Norcross. During the conference call, Norcross was asked if there will be any changes come January.
“I’ve been here 26 years, and Frank and I have had a great partnership over the last five. So no, I would not expect any radical changes. We’re very focused on continuing to accelerate our long-term growth and generating expanding profits associated with that,” he said.
Norcross did say FIS will continue with some strategic shifts that were already underway under Martire.
“Obviously, our biggest opportunity for expansion is in the global financial institution marketplace because, as we’ve shared in the past, we feel we’re under-penetrated there. But we’re going to continue to carry on the legacy that Frank’s established and are excited about the opportunity,” he said.
Martire said he is proud of his accomplishments in his five years with FIS.
“We have delivered consistently strong financial performance during a very challenging environment for our clients, achieved investment-grade status and driven shareholder returns of over 140 percent,” he said.
EverBank Financial beats forecasts
EverBank Financial Corp.’s third quarter earnings of 33 cents a share were 8 cents higher than last year and 2 cents higher than the average analysts’ forecast, according to Thomson.
“Overall we’re pleased with our results for the quarter, which capture the full impact of the numerous strategic repositioning initiatives we have executed over the past year,” CEO Rob Clements said in EverBank’s conference call with analysts.
“We continue to benefit from our diversified business model, which has enabled us to produce strong and consistent results over many interest rate and economic cycles,” he said.
Several analysts said they were impressed with the results.
“We believe EverBank is well positioned to produce upside over the next couple of years. Rarely, if ever, have we witnessed the dismantling and retooling of a financial services company to the degree that we have with EverBank,” Sterne, Agee & Leach analyst Peyton Green said in a research note.
EverBank’s stock actually fell by 8 cents to $18.97 Wednesday after the report, but Wells Fargo Securities analyst Jared Shaw thinks the price should increase.
“We continue to believe that EverBank is well positioned for loan growth given its differentiated nationwide strategy, with the current price offering an attractive entry point,” Shaw said in his report.
However, Barclays Capital analyst Matthew Keating is more cautious with an “equal weight” rating on the stock. He expressed concern about a 0.2-percentage point decline in EverBank’s net interest margin in the quarter.
“While EverBank continues to execute well with respect to its asset growth and expense reduction goals, we think it needs to show a few more quarters of similar growth with more moderate net interest margin pressure to receive a significantly higher valuation multiple,” Keating said in his report.
Atlantic Coast Financial reports third straight profit
Atlantic Coast Financial Corp. last week reported third-quarter earnings of 3 cents a share. That was the third straight quarterly profit for the parent company of Atlantic Coast Bank, which had previously not recorded a profit since 2007.
“Overall, we believe Atlantic Coast is on track with its turnaround as evidenced by continued asset mix shifting, loan growth, stable credit quality and hiring of additional staff,” said FBR Capital Markets analyst Scott Valentin in a research note.
Valentin, the only analyst following Atlantic Coast Financial, has an “outperform” rating on the stock.
Interline reverses loss
Interline Brands Inc. last week reported a third-quarter profit of $7.2 million, reversing a $7.2 million loss in the third quarter of 2013.
Jacksonville-based Interline, which markets maintenance, repair and operations products, said sales rose 5 percent to $442.4 million. Meanwhile, selling, general and administration expenses fell by 13 percent.
“We continued to see good momentum and solid growth across our end-markets during the third quarter,” CEO Michael Grebe said in a news release.
Latitude 360 plans sixth venue
As part of its ongoing expansion plan, Jacksonville-based Latitude 360 Inc. announced plans to open its sixth dining and entertainment venue in Plymouth County, Mass., in December.
The company currently operates Latitude 360 venues in Jacksonville, Pittsburgh and Indianapolis, and has announced plans to open additional venues in Albany, N.Y., and the Minneapolis area by the first quarter of 2015.
Latitude 360, which became a publicly traded company five months ago, has a target of 12 venues in operation by the end of 2016.
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