Rising mortgage rates hit Fidelity earnings

The title insurer says it is managing business for lower activity, including reducing expenses and cutting field office jobs.

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Fidelity National Financial Inc.’s earnings dropped in 2022 as rising mortgage rates slowed demand for its main business of title insurance.

In the Jacksonville-based company’s year-end conference call Feb. 23, CEO Mike Nolan said Fidelity was still able to maintain a strong profit margin in the title business in part by reducing expenses, including cutting jobs in its field offices.

Adjusted earnings fell to $1.06 a share in the fourth quarter, down from $2.34 the previous year, and earnings for all of 2022 fell to $5.36 a share, compared with $8.56 in 2021.

The big fourth-quarter drop included investment losses, as opposed to net recognized gains in the fourth quarter of 2021.

Revenue for the Fortune 500 company fell by 26% in 2022 to $11.56 billion.

Fidelity reported 10,700 employees in its field operations across the country in the fourth quarter, down 3,000 from the fourth quarter of 2021 as it cut costs.

That’s about half of Fidelity’s total employment of 21,759 as of Jan. 31, according to its annual report.

“Volumes in 2022 were considerably less than the record-setting 2021 levels, mainly due to the precipitous increase in mortgage rates in recent months,” Nolan said.

“We responded with disciplined cost actions as opened orders began to decrease, and delivered adjusted pre-tax earnings in our title segment of $1.6 billion and an industry-leading adjusted pre-tax title margin of 16.7% for the full year,” he said.

“We are proud of this result as this is our third best pre-tax title margin since 2003, despite the steep decline in mortgage volumes.”

FCC orders hearing on Tegna buyout

The Federal Communications Commission ordered a hearing before an administration law judge on Standard General L.P.’s proposed buyout of Tegna Inc.

The FCC order Feb. 24 came one year after the hedge fund announced its $8.6 billion agreement to buy Tegna, which owns 64 television stations including Jacksonville NBC network affiliate WTLV TV-12 and ABC affiliate WJXX TV-25.

The FCC said the hearing will focus on concerns that the deal could raise prices for consumers and result in job losses at the local stations.

Another issue that has been raised in the buyout is Apollo Global Management’s involvement in the deal. Apollo is helping fund the deal for Standard General and funds managed by Apollo own a majority of Cox Media Group.

Cox operates Jacksonville Fox affiliate WFOX TV-30 and CBS affiliate WJAX TV-47 and eight other stations.

Several parties have raised objections saying the Tegna deal will give Apollo a stake in four of Jacksonville’s six commercial stations, but Standard General said Apollo is only providing funding and will not have any ownership interest in the Tegna stations.

The FCC order for the hearing did not mention that issue.

“We’re asking for closer review to ensure that this transaction does not anti-competitively raise prices or put jobs in local newsrooms at risk,” FCC Chairwoman Jessica Rosenworcel said in a news release.

“The additional review will allow us to make a more informed assessment on whether proposed safeguards are sufficient to protect the public interest, and we will take the time needed to address these critical questions,” she said.

The FCC order came just two days after Standard General said all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 have expired, meaning the U.S. Department of Justice will not challenge the deal.

Standard General expressed confidence in a Feb. 22 news release that it could close the deal in March or April.

Simon report still leaves out The Avenues

Simon Property Group Inc.’s annual report shows strong occupancy for two of its three Northeast Florida properties - St. Johns Town Center and St. Augustine Premium Outlets.

However, the Indianapolis-based operator of 101 U.S. malls continues to provide little information about the status of The Avenues mall on Jacksonville’s Southside.

Simon has a 25% interest in The Avenues and for the last four years, it has included The Avenues in a list of 15 “other properties” with no other information on what that designation means.

It has a 50% interest in St. Johns Town Center and its annual report said the 1.46 million square feet of space was 96.4% occupied at year-end.

The St. Augustine Premium Outlets, which is fully owned by Simon, is 100% occupied with 327,713 square feet of space.

Simon did list $110 million in debt on The Avenues.

The company’s media relations department has not responded to several requests to explain what the “other properties” classification means.

Analyst upgrades D&B after investor presentation

A week after a disappointing fourth-quarter earnings report sent its stock tumbling, Dun & Bradstreet Holdings Inc. held an investor day presentation at the New York Stock Exchange that prompted one analyst to raise her rating on the shares.

Deutsche Bank analyst Faiza Alwy raised the Jacksonville-based business data services company from “hold” to “buy” on Feb. 23 and raised her price target on the shares from $15 to $17.

Dun & Bradstreet dropped $2.30 to $11.97 on Feb. 16 after reporting adjusted fourth-quarter earnings of 34 cents a share, a penny lower than the previous year and 2 cents lower than the average analyst’s forecast, according to Zacks Equity Research.

“Dun & Bradstreet’s investor day and product demos helped clarify the company’s value proposition to us – and following a 17% price decline last week amidst a 4Q earnings miss and lower guide – we see risk/reward as asymmetrically favorable for a largely recurring revenue business model,” Alwy said in her research note.

“While the company’s revenue growth rate has historically trended below peers (warranting a valuation discount), we have been encouraged by the company’s investments in enhanced technology/data/analytics which was evident in the products we saw,” she said.

St. Joe earnings fall on lower home sales

The St. Joe Co. reported lower earnings for the fourth quarter and all of 2022 as a decline in residential community sales offset increases in hospitality and leasing revenue.

The Panama City Beach-based real estate developer said fourth-quarter earnings fell by 6 cents a share to 48 cents, and full-year earnings also fell by 6 cents to $1.21.

Revenue for the year fell 5.5% to $252.3 million, despite a 29% increase in hospitality revenue and a 45% jump in leasing revenue.

Real estate revenue dropped 31%, “primarily due to delay in timing of site development completion and product mix, as homesite prices vary significantly by community and often sell in bulk to homebuilders, which impacts period over period results,” CEO Jorge Gonzalez said in a Feb. 22 news release.

“In addition to timing and product mix of sales in residential communities, the decrease in net income was driven by higher loan interest rates, more depreciation expense as additional assets came into service, and staffing startup costs for anticipated operating property openings,” he said.

Gonzalez said St. Joe is expecting a rebound in real estate sales revenue in 2023 and continued growth in hospitality and leasing revenue, helped by the opening of five new hotels in the first six months of 2023.

St. Joe was a Jacksonville-based conglomerate that began selling off its industrial assets in the 1990s to focus on developing its vast land holdings, mainly in the Florida Panhandle.

It moved its headquarters to the Panhandle in 2010 to be closer to its real estate projects.

Medtronic ENT says sales jump

Medtronic plc reported sales from its Jacksonville-based division, which produces surgical instruments for ear, nose and throat physicians, rose sharply in its third quarter ended Jan. 27 as supply issues eased.

The Dublin, Ireland-based company does not report sales figures for the ENT business but said its sales rose by a low-20s percentage in the quarter.

“Some of the recent revenue headwinds that have held back our growth are subsiding, including product availability in businesses like surgical innovations, cardiac diagnostics, aortic, and ENT,” CEO Geoff Martha said in Medtronic’s Feb. 21 conference call, according to a company transcript.

Medtronic’s total revenue of $7.7 billion was about the same as the previous year, with adjusted earnings falling by 6 cents a share to $1.30.

The medical products company blamed foreign exchange rates and inflation for the drop in earnings.

It said revenue rose 4.1% organically.

“I’m very encouraged by the rebound in our revenue growth, despite procedure volumes remaining a little softer in a few markets,” Martha said.

“We are confident in delivering durable revenue growth over the coming quarters as recent revenue headwinds continue to dissipate, and we execute across our businesses.”

Swiss-based firm pays J&J Vision $199M to settle suit

Alcon Inc., a Switzerland-based surgical eye care products company, announced it agreed to pay Johnson & Johnson’s Jacksonville-based vision products subsidiary $199 million to settle an intellectual property lawsuit.

Alcon said the dispute involved laser-assisted cataract surgery devices it acquired from another company in 2010.

The company said in a Feb. 13 news release “the parties have exchanged cross-licenses of certain intellectual property and other mutually agreed covenants and releases,” and Alcon agreed to pay $199 million.

It gave no other details but Reuters news service reported the settlement was announced as the case was about to go to trial in federal court in Delaware.

Reuters said the litigation involved claims that Alcon stole software from Johnson & Johnson’s laser surgery system and that J&J had been seeking at least $3.1 billion in damages.

Johnson & Johnson Vision produces contact lenses at its Jacksonville campus, where the division’s headquarters is located. Its vision surgical products business is based in Irvine, California.



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