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Basch Report
Jax Daily Record Monday, Feb. 5, 201806:20 AM EST

Landstar stock hits record; dividend boosted

Fourth-quarter earnings beat forecasts, surpass $1 billion for the first time in any quarter.
by: Mark Basch Contributing Writer

Landstar System Inc.’s year-end financial report provided a lot of good news, sending the Jacksonville-based trucking company’s stock to a new high.

Fourth-quarter earnings beat analysts’ forecasts, revenue rose above $1 billion for the first time in any quarter and the company predicted first-quarter earnings higher than analysts were expecting.

With everything going well, Landstar also increased its quarterly cash dividend.

“The operating environment experienced in the 2017 fourth quarter exceeded our expectations. The momentum and demand for our service that began in the fourth quarter of 2016 continued to strengthen into 2017,” CEO Jim Gattoni said in Landstar’s conference call with analysts Thursday.

“The increased demand, combined with a significant increase in rates that started late in the third quarter, contributed to the very strong fourth-quarter revenue and gross profit,” he said.

Revenue rose 17.8 percent in the quarter to $1.05 billion, slightly higher than the average analyst’s forecast of $1.01 billion, according to Yahoo Finance.

Adjusted earnings rose by 14 cents to $1.08 a share, beating analysts’ forecasts which ranged from $1 to $1.04.

Landstar also said a one-time tax benefit resulting from the new federal income tax law increased final net income to $1.54 a share in the quarter.

Gattoni said Landstar is expecting first-quarter earnings of $1.22 to $1.27 a share, above analysts’ forecasts before the report of 85 cents to $1.18.

With the strong financial results, Landstar’s board increased the quarterly cash dividend by 5 cents a share to 15 cents. That’s on top of a one-time $1.50 per share special dividend paid to shareholders last month.

With all that good news, Landstar’s stock rose as much as $7.55 to a record high $118.60 Thursday morning, before closing the day at $115.45.

Patriot earnings helped by tax law

Unless you’re an accounting expert, it’s becoming difficult to understand how the new federal tax law is affecting corporate earnings.

Robert Sandlin

After seeing banking companies Atlantic Coast Financial Corp. and Ameris Bancorp incur significant costs to earnings two weeks ago because of tax charges, Jacksonville trucking companies last week reported significant gains because of the new law.

Like Landstar, Patriot Transportation Holding Inc. reported a one-time tax gain that boosted earnings for its first quarter ended Dec. 31.

Patriot’s net income of $3.59 million, or $1.09 a share, included a tax-related benefit of $3.04 million, or 92 cents a share.

Without that gain, earnings would have been lower than net income of $912,000, or 28 cents, the previous year.

Revenue fell 3 percent to $27.9 million.

“Patriot and the industry face very challenging headwinds in the immediate future,” CEO Robert Sandlin said in Patriot’s conference call.

One of the continuing challenges for trucking companies is finding drivers, and Patriot has been trying to enhance its compensation packages to entice drivers to come and stay with the company.

Landstar doesn’t employ drivers, but contracts with drivers who own their own trucks to haul freight around the country.

Another challenge for Patriot has been contract losses with some customers.

Sandlin is optimistic Patriot can begin to replace that business with a new three-year contract with an existing customer, which he said will significantly increase its business. The company will begin seeing the impact of that contract this month, he said.

Former CSX exec Sanborn landing at Union Pacific

After leaving CSX Corp. last year during its upheaval of upper management, Cindy Sanborn is joining another major railroad.

Cindy Sanborn

Omaha-based Union Pacific Corp. said Sanborn will join the company Feb. 16 as regional vice president of transportation for its western region.

Sanborn was executive vice president and chief operating officer of Jacksonville-based CSX and was speculated as a possible successor to former CEO Michael Ward, which would have been groundbreaking for the industry.

Union Pacific’s announcement pointed out she was “the first woman to hold an executive operating leadership role at a Class I Railroad.”

However, most of CSX’s top executives left the company after Hunter Harrison was brought in as CEO in March 2017. Sanborn’s departure coincided with the arrival of James Foote as chief operating officer last fall.

Foote was promoted to CEO after Harrison’s death in December.

Fidelity growing title business

After spinning off its stakes in mortgage technology company Black Knight Inc. and investment subsidiary Cannae Holdings Inc., Jacksonville-based Fidelity National Financial Inc. is firmly focused on the title insurance industry.

While it doesn’t make the same splash as its investments in restaurants and other nontitle businesses over the years, Fidelity is quietly continuing to make acquisitions in the title insurance industry.

During its quarterly conference call last week, Chairman Bill Foley said Fidelity acquired 10 title and escrow companies last year for a total of about $130 million.

“We believe there will be a number of strategic title and escrow company targets to allow us to continue to grow this agency acquisition strategy in 2018,” he said.

Fidelity reported adjusted fourth-quarter earnings of 60 cents a share, down from 65 cents in the fourth quarter of 2016 but in line with analysts’ forecasts, which ranged from 58 cents to 63 cents, according to Yahoo.

Fidelity also announced it raised its quarterly cash dividend by 3 cents to 30 cents per share.

J. Alexander’s and 99 deal rejected

A deal between two companies formerly controlled by Fidelity was rejected by “disinterested” shareholders last week.

J. Alexander’s Holdings Inc. agreed to buy the 99 Restaurant & Pub chain from a company controlled by Cannae, the investment company spun off from Fidelity in November.

Lonnie Stout

Nashville-based J. Alexander’s was spun off from Fidelity in 2015.

Under the terms of the complex deal, Cannae would have ended up with a majority voting stake in J. Alexander’s if the acquisition was completed.

However, at a special meeting Thursday, disinterested shareholders of J. Alexander’s — that is, shareholders who are not company insiders — voted against the deal, the company announced without giving the vote total.

The meeting actually was scheduled for Tuesday, but J. Alexander’s adjourned the meeting for two days. It still couldn’t get the votes needed Thursday.

One major investor opposed the deal and two proxy advisers recommended voting against it in part because of the relationships between the companies formerly affiliated with Fidelity.

“The safeguards that our board put in place with respect to the transactions, and the requirement of the separate vote of the disinterested shareholders, served their intended purpose, allowing the disinterested shareholders to have the final decision,” J. Alexander’s CEO Lonnie Stout said in a news release Thursday.

“While we are disappointed that shareholders did not approve this transaction, we are confident in our overall strategy, our strong culture and our ability to deliver value to shareholders. Looking forward, we remain focused on growing our business, strengthening our competitive position and enhancing our current restaurant concepts,” he said.

Besides J. Alexander’s, the company also operates the Redlands Grill, Stoney River Steakhouse and Grill and Lyndhurst Grill chains.

Rayonier AM profits from Tembec deal

After completing its acquisition of Tembec Inc. in November that more than doubled its size, Rayonier Advanced Materials Inc. last week filed updated financials to show the combined results of the merged company.

If the Tembec deal had been completed at the beginning of 2017, Rayonier AM would have recorded revenue of $1.6 billion and earnings of $1.37 a share in the first nine months of the year, it said.

D.A. Davidson analyst Steven Chercover said in a research note that the financial data painted a positive picture of the Tembec operations acquired by Rayonier AM.

“While we did not cover nor have estimates for Tembec, it appears that the company made significant operational and financial strides in its last year as a stand-alone company judging by the year-to-year results of its operational units,” he said.

Chercover said he is waiting for Jacksonville-based Rayonier AM’s year-end report before making more forecasts for earnings, “but we have improved confidence about the set-up.”

International Baler earnings tumble

Jacksonville-based International Baler Corp.’s earnings fell 19 percent in the fiscal year ended Oct. 31 to $73,360, or 1 cent per share, according to its annual report filed with the Securities and Exchange Commission.

Sales for the baler manufacturing company fell 9.9 percent to $10.5 million.

Although sales declined, operating income was higher in fiscal 2017. However, favorable tax deductions resulted in higher net income for fiscal 2016.

APR’s Campion invests in Irish power company

A Jacksonville-based investment company founded by APR Energy Chairman John Campion acquired a majority interest in an Irish-based energy company.

John Campion

CJJ Hybrid Investments LLC said last week it acquired control of Hybrid Energy Solutions Ltd., which provides energy stations and battery storage solutions in developing countries.

Terms of the deal were not announced.

Jacksonville-based APR provides fast-track mobile power generation around the world.

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