Jim Gattoni says “2024 has its work cut out for it,” but expects a rebound from a down year in 2023 for the trucking industry.
| 12:05 a.m. February 8, 2024
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Landstar System Inc.’s results dropped in 2023, giving retiring Chief Executive Jim Gattoni a lot to talk about in the company’s year-end conference call with analysts Feb. 1.
“I’d like to thank everybody for having this be my longest call in 10 years on my last day as the president and CEO of Landstar. So that’s special,” he said.
However, Gattoni is optimistic that the Jacksonville-based trucking company can handle this down cycle for freight traffic as he heads into retirement.
“2024 has its work cut out for it, due to continuing soft conditions in the freight environment,” he said.
“Nevertheless, we have been through many business cycles before, and we still expect nothing less than 2024 being a terrific year by pre-pandemic standards.”
Landstar reported fourth-quarter revenue fell 28% to $1.204 billion, and earnings fell by 98 cents to $1.62 a share.
Revenue for all of 2023 dropped by about 29% to $5.3 billion.
“The freight environment throughout the 2023 fourth quarter reflected soft demand and readily available truck capacity. These freight market conditions were consistent with what Landstar experienced during the first three quarters of 2023,” Gattoni said.
Demand for Landstar’s freight services soared as the economy recovered from the coronavirus pandemic but the business has been in a down cycle since peaking in mid-2022.
The company is projecting the number of loads hauled by Landstar drivers in the first quarter to be 14% to 16% lower than the first quarter of 2023.
Gattoni expects trucking conditions to return to normal levels in mid-2024.
Landstar announced in December that Gattoni would retire after the conference call and be succeeded by former CSX Corp. executive Frank Lonegro. Gattoni had been CEO since the end of 2014.
“Landstar’s unique tech-enabled asset-light agent-based model will continue to be the key to our success, and I look forward to working with the Landstar team to support our independent business owners and drive profitable growth and value for our shareholders,” Lonegro said in brief remarks at the end of the call.
Nunes cautiously optimistic as he nears retirement
Rayonier Inc. CEO David Nunes also held his last quarterly conference call Feb. 1 as he prepares for retirement March 31.
The timber and real estate company headquartered in a Rayonier development in Wildlight in Nassau County also has been dealing with difficult industry trends.
“We are pleased with our overall financial performance in 2023, particularly in light of the challenging and uncertain market conditions that we faced throughout the year,” Nunes said.
Rayonier reported fourth-quarter adjusted earnings rose by 6 cents to 17 cents a share.
However, earnings for all of 2023 fell by 26 cents to 36 cents per share.
“As we move into 2024, we are cautiously optimistic that timber market conditions have generally stabilized across our portfolio and we further expect to capitalize on a growing pipeline of land-based solutions opportunities as well as continued strong demand for both rural HBU (highest and best use) and improved development real estate properties,” Nunes said.
Rayonier announced in November that Nunes will retire and be succeeded by President and Chief Financial Officer Mark McHugh.
Nunes has been CEO since the company split up with cellulose specialties products company Rayonier Advanced Materials Inc. in 2014.
McHugh credited Nunes’ leadership during the call.
“Rayonier has taken tremendous strides since we emerged from the spinoff of our specialty pulp manufacturing business in 2014 to become the only pure-play timber REIT with a best-in-class portfolio and a unique set of growth opportunities in land-based solutions and real estate development,” McHugh said.
Although it was his final quarterly call, it was not the last time Nunes will meet with analysts. Rayonier will hold an Investor Day presentation in New York on Feb. 28.
FIS completes sale of majority stake in Worldpay
Fidelity National Information Services Inc., or FIS, completed the sale of a 55% stake in its Worldpay Merchant Solutions business Jan. 31.
FIS received net cash proceeds of more than $12 billion from the sale, which it will use to pay off debt and repurchase shares of its stock.
Jacksonville-based FIS bought the merchant payments technology company for $43 billion in 2019 to expand beyond its core banking technology business.
However, Worldpay produced disappointing results for FIS, and in July 2023 the company announced the agreement to sell a majority stake to private equity funds managed by Chicago-based GTCR.
FIS retains a 45% stake in the Worldpay business.
Analyst: Regency Centers Corp. attracts retailers
Regency Centers Corp. operates some of the most attractive shopping centers for retailers, according to a Wells Fargo Securities rating of retailer preferences.
In part because of Regency’s high rating among its peers, Wells Fargo analyst Dori Kesten initiated coverage of the Jacksonville-based company Feb. 1 with an “overweight” rating.
Kesten was one of two analysts to recommend purchase of Regency’s stock ahead of its Feb. 8 year-end earnings report.
Deutsche Bank analyst Tayo Okusanya rated Regency at “buy” as part of an overall initiation report on real estate investment trusts by the firm Jan. 30.
“With investor sentiment improving for Strips, we view Regency’s stock underperformance of late as a good entry point into this Strip leader with limited tenant credit risk, a history of beats, and an upward earnings bias,” Kesten said in her report.
Kesten said Regency ranks a close second behind Federal Realty Investment Trust in the Wells Fargo Retailer Attraction Score, which the firm created to rate retailers’ preferences for certain shopping center operators.
Regency operates mainly strip shopping centers anchored by grocery stores. The company’s high score is “driven by its customers’ high propensity to spend at its centers and relatively strong visitation ranking vs. its local like-sized centers,” Kesten said.
“The Attraction Score, combined with Regency’s lowest exposure to market vacancy plus new supply, highlights its strong positioning to attract tenants to its centers which we expect to drive further occupancy gains,” she said.
The Deutsche Bank report covered 37 REITs and didn’t give details on Regency, but did say it has a general “overweight” rating on strip center operators.
“Strong demand from retailers should continue to drive up occupancy and rents. We are cognizant of potential weakness in the consumer outlook, but expect less impact on necessity shopping trends if this occurs,” it said.
Okusanya set a $74 price target for Regency’s stock and Kesten set a $70 target. The stock has been trading in the low $60s recently.
Fourth analyst recommends Redwire stock
Redwire Corp. has not lived up to its lofty financial projections made before the Jacksonville-based space technology company went public in September 2021.
However, analysts continue to express confidence in the stock.
Cantor Fitzgerald analyst Andres Sheppard initiated coverage of Redwire on Feb. 2 with an “overweight” rating, becoming the fourth analyst to begin covering the company with the equivalent of a buy rating.
Sheppard said in his report the diversification of Redwire’s products and customers and the overall growth of the space industry should help the company.
“We believe that operating as a merchant supplier across a mixed customer base, with different products and in different geographies, is an important differentiator, and we believe it will provide diversification and resiliency to the company’s revenue,” he said.
“We see Redwire’s success as highly-correlated with the continued growth of the space industry, which is driven by the growing budget of space agencies, and the proliferation of commercial space businesses.”
Redwire’s stock peaked at $16.98 in October 2021 but has been trading mostly below $4 since mid-2022.
Sheppard set a $5 price target for the stock, which was trading at $2.92 at the time of his report.
Tyson losing money in beef business
Tyson Foods Inc. recorded $75 million in plant closing charges in its first quarter ended Dec. 31, including the closing of its Jacksonville beef plant.
The Arkansas-based food products company reported an adjusted net operating loss of $117 million in its beef business in the quarter and said it expects results in that segment for the full fiscal year to range from an operating loss of $400 million to breaking even.
Tyson filed a notice in November under the Worker Adjustment and Retraining Notification Act that it would close its Jacksonville plant, eliminating 219 jobs.
The company has not said anything specifically about the plant but said in its quarterly report filed with the Securities and Exchange Commission that it closed case-ready, value-added plants in its beef segment in Jacksonville and in Columbia, South Carolina, “to optimize asset utilization.”
The two beef plant closures followed the shutdown of six chicken processing plants in the fiscal year ended Sept. 30.
Beef was the largest business segment for Tyson in the first quarter with about $5 billion of its total sales of $13.3 billion.
The company’s adjusted earnings fell by 16 cents in the quarter to 85 cents per share.
CSX agrees to sick leave benefits for four more unions
Jacksonville-based CSX Corp. announced Feb. 1 it reached agreements with four more unions, covering more than 600 employees, to provide paid sick leave benefits.
CSX and other major railroads reached agreement with unions in late 2022 for new labor contracts, but CSX has been negotiating individual agreements with a number of unions in the past year to cover sick leave.
The company said its agreements have extended sick leave benefits to thousands of workers.
The latest agreements cover the SMART-TD Conductors/Trainmen, SMART-TD Yardmasters, International Brotherhood of Boilermakers, and Carrolton Road-Transportation Communications Union-represented Engineers/Yardmen/Maintenance of Way employees.