St. Joe misses earnings - and guides forward estimates lower

[GaltsGulch]

Joe misses expectations (again), and lowers forward outlook (again). When Joe last lowered their Full Year earnings expectations significantly last quarter, they didn't guide low enough. Now guiding significantly lower for the year. I'm covering short position this morning in the low $40's ($42)... I think the risk/reward is mostly played out on the short side of the stock. If you take the middle of the range of earnings $0.85 and apply a market multiple (16x P/E) to that, you would arrive at a target price of around $14 for JOE. HOWEVER, their land holdings (which are very tough to value as they won't become earnings next year, but rather over the next 20 yrs.) have a net asset value of at least $25/share according to the most conservative analysis I have reviewed. So you add $25 to $14 and you come up with $39 as fair value... Not to say sentiment will not worsen and take JOE below my lonely estimate of fair value, its just that you can't be greedy.

--------------------------------------------------------------
07:24 JOE St. Joe Company reports Q2 in-line; lowers FY06 EPS guidance (44.90 ) *****

Reports Q2 (Jun) earnings of $0.25 per share, in line with the Reuters Estimates consensus of $0.25; revenues fell 25.0% year/year to $194.7 mln vs the $214.3 mln consensus. Co lowers guidance for FY06, sees EPS of $0.70-1.05 vs. $1.16 consensus.

07:08 JOE sees FY06 $0.70-1.05 vs $1.16 Reuters consensus

07:07 JOE prelim $0.25 vs $0.25 Reuters consensus; revs $194.7 mln vs $214.33 mln Reuters consensus

07:07 JOE St. Joe Company and Beazer Home announce new long term relationship (44.90 ) *****

JOE and and Beazer Homes USA (BZH) announce the two cos have entered into a long-term relationship under which JOE would entitle, develop and sell home sites in a number of its Florida towns to Beazer Homes, who would build and market the single and multi-family homes.

[SHELLY]

JOE and and Beazer Homes USA (BZH) announce the two cos have entered into a long-term relationship under which JOE would entitle, develop and sell home sites in a number of its Florida towns to Beazer Homes, who would build and market the single and multi-family homes.

Sounds like a match made in heaven.

"Beazer said that its second-quarter profit fell to $102.6 million, or $2.37 a share, from $112.7 million, or $2.50 a share, a year earlier. Revenue dropped to $1.20 billion from $1.29 billion. The Atlanta-based builder posted a 16% drop in new orders to 4,378 homes from 5,202 a year earlier.

The company, noting that it doesn't expect housing conditions to improve in the remainder of the year, said it now expects 2006 earnings of $9.25 to $9.75 a share. Beazer's previous guidance called for earnings of $10 to $10.50 a share; analysts predict a profit of $9.60 a share.

Pulte (homebuilders) management said the biggest issue it's facing is that a large portion of buyers are waiting on the sidelines because they're seeing a risky housing market.

"How bad will it get and how long will it last?" management asked. "No one can answer these questions with any degree of certainty."

One major issue continues to be the huge amount of housing inventory for sale across the country -- particularly in California and Florida, Pulte said. For its part, Beazer posted its biggest order drop in the West and in Florida. " :idontno:

[GaltsGulch]

Shelly, me thinks that builders are a leading indicator of housing valuation trouble, not a co-incident or trailing indicator. Me further thinks that when they stop building, and start writing down certain assets (reporting losses), we won't yet be at a bottom for the pending real estate re-valuation, but that will mark the beginning of the swiftest most significant downward valuation move in the cycle. No one can say when this swift downward move will take place, but hopefully we'll know it when we see it. Chances are we (myself included) will not have the fortitude to see the opportunity, because when it presents itself it will not appear to offer any quick ROI. My best guess, is that we see this largest downward phase begin in 6 months, and last for the ensuing 12-18 months before we stabilize. Carrying costs are a thorn in the investulators side currently. We'll move to the bottoming phase when "carrying costs" are no longer thought of as "carrying costs" b/c they can no longer be "carried" by a significant enough chunk of 2nd home owners/speculators, that sales are mandated by economic survival or court appointed trustees. We're not at that point in the phase, just yet IMO.

[goofer44]

GALTSGULCH
congratulations on your profitable trade. no one ever went broke taking a profit !!

[Bs1chiro]

And what was JOE trading at today????? RIGHT! Still a great long term investment! :clap_1:

[SHELLY]

And what was JOE trading at today????? RIGHT! Still a great long term investment! :clap_1:

People said that when it was trading @ $80 too.

[goofer44]

buy on anticipation....sell on the news. shelley, in the 80's all the good news was in the price...in the 40's all the bad news is in the price. look at charts on EVERY housing stock....the downtrend is broken. you have a road map to tell you what the bottom is, because the lows have been seen. when the market starts to test the lows of the housing stocks YOU BUY because you know where the bottom has been established. every housing stock has been trading at book value or very close to book. no one can ever call the highs or lows but we have a very good idea of the range now. a patient investor will make a lot of money buying housing stocks on the next pullback, in my humble opinion.

[destinsm]

buy on anticipation....sell on the news. shelley, in the 80's all the good news was in the price...in the 40's all the bad news is in the price. look at charts on EVERY housing stock....the downtrend is broken. you have a road map to tell you what the bottom is, because the lows have been seen. when the market starts to test the lows of the housing stocks YOU BUY because you know where the bottom has been established. every housing stock has been trading at book value or very close to book. no one can ever call the highs or lows but we have a very good idea of the range now. a patient investor will make a lot of money buying housing stocks on the next pullback, in my humble opinion.

Fill me in on what bottom you are seeing... Looks to me like they are still falling into the abyss...

Referring to the attached graph and looking at the previous manic stock market (NASDAQ of late 90's early 00's) and comparing to the DJ_USHB (Dow Jones US Home Builder Index) we have a long ways to go.....

They seem to follow pretty well on the way up in both time and magnitude... think that will change on the way down???

http://tinyurl.com/rquf7

[goofer44]

destinism
i feel comfortable nibbling on kbh @ 38 ryl @34 tol @22 dhi @20 hov @25 ctx @43 phm @26 joe @42 .........all at their recent lows. at these levels they offer good value. these stocks all had violent reactions to the upside on good volume. they got too cheap on a book value basis. these prices i stated indicate to me the the price points that i want to nibble at. i am a long term investor ( 2-4 years ) if these stocks return to the prices i indicated i will put on 25% positions.......if they don't return to those prices, i guess i won't own any housing stocks !! i am a very disciplined investor and perhaps a little pigheaded.....but i have done well over 30 years following this game plan. my other strategy is to buy great blue chip companies that pay good dividends and have a long term track record , when they have a temporary stumble. i have been pecking away at mmm ups dow. i am NOT a momentum player. i bought c bac pfe aig cvx bp xom mo when they were unloved. i also bought intc msft and ge and am still waiting !!! i think my wait in intc and msft will still be far off into the future but i really like ge. they raise the dividend every year and will be a big beneficiary of alternative fuel sources. sorry to run on but i really love the challenges of investing.

[Jellyfish]

Technical analysis can be befuddling- the 2 year chart shows a different relationship:

http://www.marketwatch.com/tools/quotes/intchart.asp?symb=DJ_3728&siteid=mktw&time=9&freq=1&comp=&compidx=NASDAQ%7E3291&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp

[destinsm]

Technical analysis can be befuddling- the 2 year chart shows a different relationship:

http://www.marketwatch.com/tools/quotes/intchart.asp?symb=DJ_3728&siteid=mktw&time=9&freq=1&comp=&compidx=NASDAQ%7E3291&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp'

I am in no means relating the two during the same timeframe as you have posted... I am simply pointing out the similarity of charts during their so called "bubble" periods.

Look at the similarities of the run up, peak, and now decents, in the two different charts.

That is all I am referring to...

[GaltsGulch]

thanks goofer... looks like i got a bit lucky picking the intrday bottom on morning after earnings there.. better to be lucky than good.

I have to disagree with you on the builders.... I don't trust their Book Value, and I certainly think earnings estimates could not only be revised down further, they could go to zero (and below) on asset write downs for some.... I don't have NEARLY as much conviction on the short side of the builders now as I did last fall. If I were to buy some BZH or PHM right now, I would only buy them to pair them up with a group of stocks I think is still incredibly primed to have a massive pullback (SubPrime Mortgage Lenders based in California) ... where builders trade at what appears to be a fire sale 4-5 X earnings, these subprime mortgage hockers in california trade at 8-10X "earnings", most of which is coming from counting negatively amortization on Option Neg Am ARM loans as income. The two candidates that I'm considering pairing up with builders, or simply naked shorting are DSL (Downey) and FED (First Federal Financial).... my higher conviction between the two is on FED.

anyone have any other stock ideas.... other names I like here today are some recent blowups MRGE, and CMVT, both of which I think have been overdone on the downside.

would like to hear anyone's imput.

[goofer44]

Galtsgulch
I like your idea on pairs trading. long a couple of housing stocks and short some sub-prime lenders. I kinda like buying UPS on this break. I like it because I think oil prices are close to peaking. With conservation, a natural slowdown in the use of oil on a discretionary basis ( less driving for pleasure or running to the grocery store for a pint of ice cream ), development of alternative fuels, a slowing worldwide economy and increased exploration, I think oil prices will move down in the next year. UPS is a great growth company with high barriers of entry. Decent dividend yield with fantastic growth prospects. I think Wall Street has over-reacted. I have been nibbling.

[Pirate]

thanks goofer... looks like i got a bit lucky picking the intrday bottom on morning after earnings there.. better to be lucky than good.

I have to disagree with you on the builders.... I don't trust their Book Value, and I certainly think earnings estimates could not only be revised down further, they could go to zero (and below) on asset write downs for some.... I don't have NEARLY as much conviction on the short side of the builders now as I did last fall. If I were to buy some BZH or PHM right now, I would only buy them to pair them up with a group of stocks I think is still incredibly primed to have a massive pullback (SubPrime Mortgage Lenders based in California) ... where builders trade at what appears to be a fire sale 4-5 X earnings, these subprime mortgage hockers in california trade at 8-10X "earnings", most of which is coming from counting negatively amortization on Option Neg Am ARM loans as income. The two candidates that I'm considering pairing up with builders, or simply naked shorting are DSL (Downey) and FED (First Federal Financial).... my higher conviction between the two is on FED.

anyone have any other stock ideas.... other names I like here today are some recent blowups MRGE, and CMVT, both of which I think have been overdone on the downside.

would like to hear anyone's imput.

If you don't trust the builders' books I don't see why you have any faith in JOEs book. Seems like they are awfully proud of the swamps.

[GaltsGulch]

Pirate, JOE is not comparably analyzed along the typical basket of homebuilding stocks, PHM, RYL, BZH, TLB, HVN etc, because it is quite different, not because it builds second homes primarily rather than primary res., but more particularly because it's land holdings as a percentage of assets far far far surpass the other builders as a percentage of enterprise value (or any way you want to slice it) regardless if you value their land holdings in NW FLorida at $3,000/acre or more realistic (higher) values. Take a look at the Price/Earnings mutliple on JOE vs. any of the above builders and you'll see you are dealing with a different animal. I'm done with my short on JOE, b/c I have a profit, and because it is hard to agree upon a value for their land. I'm neutral on JOE now on a trading basis, and somewhat positive for those who don't care about 15% moves in the stock but are looking to own it for the next cycle, which could be 5 or even 10 years away.


My two cents only. Feel free to disagree. Are you really bullish on JOE now, really bearish. Have you been bullish/bearish on JOE over the past two years? Any other ideas?

[GaltsGulch]

Galtsgulch
I like your idea on pairs trading. long a couple of housing stocks and short some sub-prime lenders. I kinda like buying UPS on this break. I like it because I think oil prices are close to peaking. With conservation, a natural slowdown in the use of oil on a discretionary basis ( less driving for pleasure or running to the grocery store for a pint of ice cream ), development of alternative fuels, a slowing worldwide economy and increased exploration, I think oil prices will move down in the next year. UPS is a great growth company with high barriers of entry. Decent dividend yield with fantastic growth prospects. I think Wall Street has over-reacted. I have been nibbling.


I don't have a strong enough view on UPS or FEDex right now to jump in, because although they've been hit a bit, I am unfortunately of the view (guess) that we're headed for a fairly subsantial consumer lead recession, which will necessarily lead to disappointment for UPS, FedEx, before we see the brighter side of what are truly extraordinarily well run companies... I think they are a value trap right now, but just my view.

I am going to jump in with ONE FOOT, on the short side of First Federal Financial at some point today (I think). I'll definitely be losing money if we're headed for a soft landing in California real estate, and if employment holds up very well. I prefer to quote the sage CEO of CountryWide Financial here, who is pulling back their horns on loans. He's been around for 52 years in the business and was quoted in yesterday's WSJ as saying "I've never seen a soft landing in the housing/mortgage business". Maybe this time will be different I suppose, but my bet/risk/guess is that this hard landing will be worst than most since it comes on the heals of an historic run up, replete with massive scale everyman speculation.

If I lose on my short bet, maybe you'll buy me a beer when I get down there next time.

[Pirate]

Galtsgulch

Interesting, I agree with you that JOE doesn't belong in the same basket as housing stocks and the land is the reason. I don't like the stock but I wouldn't short it anymore. My reasoning is that many investors have such low expectations in general for so many stocks that this may be close to bottom, not that it's worth what it's selling for. To be honest, for the first time in years I have been having problems picking stocks and have parked much of my $. I went ahead with a few food stocks but I doubt they will return more than a short bond or CD, every other move has been a sell. This summer I shifted from 90 percent stocks to 40 percent. :creepy:

[destinsm]

St. Joe Co. lays off employees
Number yet to be released

By Billy Bruce and
Ferdie De Vega
DEMOCRAT STAFF WRITERS


http://tallahassee.com/apps/pbcs.dll/article?AID=/20060812/BUSINESS/608120312/1003

[Cil]

I was wondering when someone would notice the press release.
My husband (and several others in his office) got the pink slip on Friday morning.

Press Release (http://www.joe.com/web/Corporate/News/IRPressRoom.aspx)

[destinsm]

I was wondering when someone would notice the press release.
My husband (and several others in his office) got the pink slip on Friday morning.

Press Release (http://www.joe.com/web/Corporate/News/IRPressRoom.aspx)

Sorry to hear that... Just another side effect resulting from the fallout of the RE Boom...

Sad thing is that this is what gets the ball really rolling... We hyper inflated RE and everything it supports (jobs, consumerism, etc) and now that we are on the downside people will be loosing jobs, buying less things (more jobs lost), causing even more pain...

So the cyclical downward nature of the RE bust begins...

[Cil]

.

Sad thing is that this is what gets the ball really rolling... We hyper inflated RE and everything it supports (jobs, consumerism, etc) and now that we are on the downside people will be loosing jobs, buying less things (more jobs lost), causing even more pain...
...
Yes, your description is spot on, and this might just be the first round of layoffs.

The 'correction' needed to happen, it's just a bummer to be caught up in it, but we always knew there was a chance this could happen to us when we came out here.

[Beachlover2]

I am so sorry to hear that Cil - my husband as well is sitting on the bubble right now - his company is in big trouble.

Do you plan to try and stay in the area?

Hopefully this will out will work out for the better.

Best Wishes :D

[TooFarTampa]

So sorry about this Cil -- I'm sure things will work out for you guys, but these things are never easy. Keep us posted.