In a generally lackluster second quarter for the stock market, one Jacksonville company stood out, and it wasn’t even around for the full three months.
Black Knight Financial Services Inc. was a big hit on Wall Street after its initial public offering May 19, rising 26 percent from its $24.50 IPO price through the end of the quarter.
Web.com Group Inc. actually had a bigger gain for the second quarter, rising 27.8 percent to $24.22 over the full three months. But Web.com is playing catchup after a sharp drop in the stock in the last half of 2014 and still has a way to go. The stock was trading in the mid-$30s in June 2014 before the drop.
No other Jacksonville-based company came close to those two.
Black Knight, the mortgage technology and analytics company spun off from Fidelity National Financial Inc., became a widely covered company as at least 10 analysts issued initiation reports on the stock last week.
Black Knight is actually more widely followed than Fidelity, according to Thomson Financial data, with 15 analysts now covering the stock. Fidelity only has 10.
Analysts agree that Black Knight is an attractive company because of its dominant position in the mortgage technology business, with more than half of all U.S. first mortgage loans processed through its systems.
“We view Black Knight as the leading provider of life-of-loan solutions to the nation’s largest mortgage lenders,” said a report by SunTrust Robinson Humphrey analyst Andrew Jeffrey, who issued a “buy” rating on the stock.
“Timing is favorable for Black Knight to monetize its position as the scale leader in providing mission critical tech services to the mortgage industry, which is in need of standardized compliant solutions on the back of the credit crisis,” said a report by J.P. Morgan analyst Tien-Tsin Huang, who has an “overweight” rating.
“Secular tailwinds mixed with industry utility economics puts Black Knight’s organic growth and margins near the top of our fintech coverage to support our overweight rating,” said Huang, who has a $35 price target for the stock. Jeffrey’s price target is $36.
However, as the stock passed the $30 level in the market, some analysts thought it had gone far enough for now.
“While Black Knight has an attractive recurring revenue stream and high earnings before interest, taxes, depreciation and amortization margins, our enthusiasm is tempered by the relatively full valuation,” said a report by Keefe, Bruyette & Woods analyst Bose George, who rates the stock at “market perform.”
Goldman Sachs analyst James Schneider’s report said “the stock largely reflects much of the potential for new large customer wins” and at 29 times his estimated 2016 earnings, it was priced well above its peer group.
Schneider, who rates Black Knight at “neutral,” also expressed concern about Fidelity’s continued 55 percent voting control over the company after the IPO.
Schneider has a $30 price target for the stock. Stephens Inc. analyst John Campbell has a $34 price target, but is still cautious with an “equal weight” rating after the stock’s early rise.
“We view Black Knight as a great long-term core holding, but we would like to wait for a better entry point to put new money to work,” Campbell said in his report.
According to Thomson, eight of the 15 analysts rate Black Knight at the equivalent of a “hold,” while the rest rate it as a “buy.”
Gannett split a hit on Wall Street
Another new company that was an immediate hit on Wall Street was Tegna Inc., the company formed out of the former broadcasting division of Gannett Co. Inc.
The split of former Gannett’s broadcasting and newspaper divisions took effect last Monday and Tegna’s stock rose by $1.52 to $31.63, on a day when most of the market fell sharply in response to the Greek debt crisis.
The new Gannett, consisting of the old company’s newspaper division, rose 77 cents to $14.13 last Monday.
Tegna operates 46 television stations, including WTLV TV-12 and WJXX TV-25 in Jacksonville.
Baird puts FIS in focus
Fidelity National Information Services Inc.’s stock didn’t do much in the first half of this year, but Robert W. Baird & Co. listed the company as one its “July Focus Ideas” that look “particularly attractive.”
“The stock has been close to a flat relative performer year-to-date as its key indicators were acting as headwinds leading into 2015,” Baird said in its report.
However, that flat performance is one reason that Jacksonville-based FIS is one of “13 names that look most currently actionable,” the firm said.
EverBank passes its stress test
EverBank Financial Corp. last week said it is prepared to handle the worst of possible economic conditions over the next couple of years.
The Jacksonville-based bank released the results of its “capital stress test,” a required assessment by large financial institutions about how they would perform in a financial or economic crisis.
EverBank’s results said in the “most severely adverse of economic environments,” it would expect to lose $220 million for the period from Oct. 1, 2014 through Dec. 31, 2016. However, it has enough capital to absorb a potential loss of that size.
“In each of the scenarios and periods modeled, the Bank was able to maintain capital performance above both regulatory minimum standards as well as more rigorous internal standards,” EverBank said in its report.
“As a result, management believes that the result of these activities is a reasonable representation of how management would operate under the prescribed scenario and exhibits the strength of the Bank’s existing capital structure and how this capital structure could support business operations in a range of economic environments,” it said.
Deutsche Bank keeps everyone waiting
As the banking world waits for more details of how Deutsche Bank plans to overhaul its operations, its new co-CEO last week told everyone they will have to wait a little longer.
In a message to employees as he took the CEO role July 1, John Cryan said he is in agreement with the “broad decisions” of the previous management’s “Strategy 2000” plan to cut back some of the bank’s global operations.
When that plan was announced in April, the previous management said it would provide more details in about 90 days.
However, when Cryan came on board Wednesday, he said in his message that “as a new co-CEO marking my first day in the role, I believe it right to take the summer and early autumn to decide how to best execute those decisions. We will therefore update the market with further details by the end of October.”
Deutsche Bank opened its Jacksonville operations center in 2008 and has grown it to 1,700 employees. The company has said it remains committed to Jacksonville.
Property owners announce merger
Chambers Street Properties and Gramercy Property Trust Inc., which both own major Jacksonville properties, announced an agreement to merge last week.
Gramercy owns the 1.2 million-square-foot Bank of America office campus on the Southside near The Avenues mall.
Chambers Street owns two industrial properties on Westside, the 601,500-square-foot West Point Trade Center and a 772,210-square-foot distribution center for Unilever at 12200 President’s Court. It also owns a 321,500-square-foot building in Elkton in St. Johns County.
The merged company will have 288 industrial and office properties with 52 million square feet of space throughout the U.S. and Europe.
Rayonier buys more timberland
Rayonier Inc. last week announced it has expanded its timberland holdings with two new deals near existing land holdings.
The Jacksonville-based company bought about 12,200 acres in Louisiana for $25.5 million and 5,600 acres in Oregon for $34 million.
Rayonier also said it bought about 4,600 additional acres of timberland in Florida and Georgia in the second quarter.
That brought its total purchases for the year to 35,000 acres bought for about $88 million.
Rayonier owns, leases or manages a total of about 2.7 million acres of timberland in the Southeast and Northwest U.S. and in New Zealand.
St. Joe results down
After recording big gains in the second quarter of 2014 on the sale of its RiverTown community in St. Johns County, The St. Joe Co. last week said it expects lower revenue and earnings in this year’s second quarter.
St. Joe expects revenue of $36 million to $38 million in the 2015 second quarter, down from $68.2 million last year that included $43.6 million from the RiverTown sale.
The company also said it expects pretax income of $2 million to $3 million, down from $23.3 million last year when it recorded $26 million in pretax profits from the RiverTown deal.
The real estate development company formerly headquartered in Jacksonville sold the 4,057-acre Rivertown community to Mattamy Homes.