St. Joe (JOE) Q2 Earnings Surpass Estimates, Revenues Lag

The St. Joe Company (NYSE:JOE) reported second-quarter 2016 net income of $1.8 million or 2 cents per share, surpassing the Zacks Consensus Estimate of a cent. The company had reported a net loss of $0.2 million or zero cent per share in the year-ago quarter. Lower expenses contributed to this beat.

However, total revenue for the quarter came in at $29.5 million, decreasing 22.0% year over year. Revenues were almost in line with the Zacks Consensus Estimate of $29.7 million. Decline in real estate sales as well as timber sales mainly pulled the revenue figure down though the negative was partly offset by an uptick in resorts and leisure revenue and in leasing revenue.

Nevertheless, the company remains focused on growth while adhering to a low fixed expense structure. In fact, total expenses for the quarter fell 14.4% from a year ago to $27.4 million.

Quarter in Detail

In second-quarter 2016, real estate sales fell significantly to $6.7 million from $14.0 million in the year-ago quarter. Results included $5.8 million in residential real estate sales and $0.9 million in rural land sales. Timber sales also declined to $0.7 million from $2.3 million in the prior-year period.

However, the company reported a 2.6% increase in resorts and leisure revenues to $19.8 million. Increased average room rates at both the WaterColor Inn and in the vacation rental program plus the rise in membership revenue from the St. Joe Club & Resorts private membership club helped the segment’s results to improve. Moreover, leasing revenues grew 4.5% to $2.3 million.

Finally, St. Joe exited the second quarter with cash, cash equivalents and investments of $399.8 million, up from $394.9 million as of Mar 31, 2016. The increase was due to net receipts from operations and other activities.

Our Viewpoint

In the long run, we believe St. Joe’s focus on enhancing its resort-based operations and leasing business would boost its profitability. Sale of non-strategic assets also provides it with substantial liquidity for developmental needs. But volatility in sales revenues at a few segments, and regional business concentration increases its risk.

St. Joe currently has a Zacks Rank #3 (Hold).

Investors interested in the real estate industry may consider stocks like Mitsubishi Estate Co., Ltd. (OTC:MITEY) , Henderson Land Development Co. Ltd. (OTC:HLDCY) and Sun Hung Kai Properties Limited (OTC:SUHJY) . Each of these stocks carries a Zacks Rank #2 (Buy).