With stocks teetering and the IPO market basically dormant, it seems like the worst possible time to bring out an initial public offering.
Yet, Advanced Disposal Services Inc. is scheduled to bring its IPO to the market this week.
The waste management company headquartered in Nocatee in St. Johns County hopes to sell about 21.4 million shares at $20 to $22 each.
Advanced Disposal filed an updated registration statement and other documents with the Securities and Exchange Commission last week that showed, among other items, the company has changed its name.
Although the company has been doing business under the Advanced Disposal name, it originally filed its IPO documents under the parent company name ADS Waste Holdings Inc.
The parent company is now officially Advanced Disposal.
Last week’s filings also indicated, for the first time, how much stock Advanced Disposal intends to sell in the IPO.
The stock sale will consist of about 9 million new shares issued by the company and 12.4 million shares controlled by OPSEU Pension Trust, a Canadian government pension fund manager.
OPSEU’s 12.4 million shares represent a 20.6 percent stake in the company. Advanced Disposal will not get any proceeds from the sale of those shares, only from the 9 million new shares.
Advanced Disposal’s largest shareholder is an investor group led by Highstar Capital, which acquired control of the company in 2006. Highstar controls 69.3 percent of the stock and will retain a majority interest after the IPO.
Advanced Disposal has not yet reported yearend results but the company did say last week it expects 2015 revenue to be $1.393 million to $1.399 million, slightly lower than 2014 revenue of $1.403 million.
The company said several factors caused the decline in revenue, including divested businesses, lower fuel cost recovery fees, lower special waste volumes and lower recyclables.
Advanced Disposal serves about 2.8 million residential and 202,000 commercial and industrial customers in 18 states.
The company moved its headquarters to Nocatee in 2013. Its SEC filing lists its address in “Ponte Vedra” with no “Beach” included.
Once the stock is sold, it will trade on the New York Stock Exchange under the ticker symbol “ADSW.”
Of course, if Advanced Disposal is able to successfully bring the IPO to the market this week, the big question is how will Wall Street react.
“It’s a very tricky time to take a company public now,” said Kathleen Smith, principal at Renaissance Capital, a Connecticut firm that manages IPO-focused exchange traded funds.
The overall market was so bad that no IPOs came to the U.S. market in January, the first month without an IPO since September 2011, Smith said.
However, the market finally woke up last week as the first two IPOs of the year reached Wall Street and did well.
Editas Medicine Inc. was priced at $16 and rose $2.20 on its first day of trading Wednesday. Also, BeiGene Ltd. jumped $4.32 Wednesday after being priced at $24.
Those are both biotech companies, which may generate more excitement than a waste management business.
But the market did show an appetite for waste management stocks last month when two companies announced a merger and saw their stocks rise: Waste Connections Inc. posted a 6.5 percent increase for the month of January, defying the overall market slump, and Progressive Waste Solutions Ltd. jumped 19.6 percent.
“Some of the waste companies have held up well,” Smith said.
Smith said Advanced Disposal will appeal to some investors because of its experienced management and its “stable slow growth market.”
However, she also said some will be cautious because of its high debt burden and capital expenditures.
It will be interesting to see how the market receives Advanced Disposal this week.
Rayonier AM outlook still cautious
Rayonier Advanced Materials Inc. last week reported fourth-quarter adjusted earnings of 32 cents a share, sharply lower than its year-earlier earnings of 61 cents.
However, it did beat analysts’ forecasts of 22 cents to 27 cents a share, according to Thomson Financial.
The earnings beat didn’t do anything to lift Rayonier AM’s faltering stock price because of its still uncertain outlook for this year.
“While the company did post a strong quarter, it also reduced guidance for 2016 on lower prices and volume in the cellulose specialties business,” RBC Capital Markets analyst Paul Quinn said in a research note.
Rayonier projected 2016 earnings before interest, taxes, depreciation and amortization (EBITDA) to be $175 million to $190 million, lower than analysts’ forecast of $178 million to $203 million, according to Thomson.
It’s also well below the company’s 2015 EBITDA of $238 million.
Quinn maintained a “sector perform” rating on the stock but lowered his price target from $9 to $8, with the stock trading at about $7 at the time.
“We’re going to do everything in our power to transform our business and drive stockholder value,” CEO Paul Boynton said in the Jacksonville-based company’s conference call with analysts Tuesday.
Rayonier AM is taking steps to reduce costs and the maker of cellulose specialties products is also working to develop new products, Boynton said.
“Our goal is to have 20 percent of our revenues derived from new products within a decade and we feel confident on achieving this target,” he said.
Some analysts think Rayonier AM could be doing more now. Chip Dillon of Vertical Research Partners expressed disappointment the company is not taking advantage of the low stock price to buy back shares, which would make its remaining outstanding shares more valuable.
“We are ‘floored’ by management’s insistence that investing in its own shares is a low priority regardless of price. Either this reflects a capital allocation process that arbitrarily excludes repurchases, or it reflects management’s potentially deeper concerns for 2017 and beyond,” Dillon said in his research report.
Dillon maintained a “hold” rating on the stock but lowered his price target from $13 to $8.
D.A. Davidson analyst Steven Chercover is more optimistic, maintaining a “buy” rating with a $17.50 target. But he also advocates share repurchases.
“After seeing the equity ravaged in the past 18 months, management is being defensive, allocating free cash flow to debt repayment. But, as ‘arm chair quarterbacks’ in Super Bowl week, we’d like to see a little offense in the form of a share repurchase,” Chercover said in his report.
Analyst upgrades Rayonier Inc.
Rayonier Inc., which split up with Rayonier AM in 2014, will report its yearend earnings this week.
But in advance of the report, BMO Capital Markets analyst Mark Wilde upgraded his rating on the timber and real estate company from “market perform” to “outperform.”
Wilde said in his report Rayonier’s stock is trading well below his estimate of the Jacksonville-based company’s net asset value.
“Although we are not ‘timberland bulls,’ we regard the spread between Rayonier’s share price and our cautious assessment of NAV as simply too large to persist,” he said.
“If this spread persists, we believe that Rayonier will eventually attract outside bids.”
Blizzard hurts Stein Mart sales
Stein Mart Inc. on Thursday reported a drop in January sales, as business in its Northeast stores was impacted by the blizzard at the end of the month.
The Jacksonville-based fashion retailer said sales were flat for the month before the storm hit.
Total sales for the four weeks ended Jan. 30 fell 0.1 percent to $69.5 million and comparable-store sales (sales at stores open for more than one year) fell 2.2 percent.
For the fiscal year ended Jan. 30, total sales rose 3.2 percent to $1.36 billion and comparable-store sales rose 1 percent.
Stein Mart operated 278 stores across the country at the end of January, eight more than it had at the end of January 2015.
Analyst still likes Atlantic Coast Financial
The only analyst covering Atlantic Coast Financial Corp., Bob Ramsey of FBR & Co., maintained an “outperform” rating on the Jacksonville-based banking company after its yearend report.
“ACFC continues to build out lending teams in its footprint, as relationships are the key to booking higher yields,” Ramsey said in his research note last week.
He said loan growth was “lackluster” in the fourth quarter.
“Despite this, we like ACFC’s focus on growing its presence in a coveted market, its focus on profitability and its scarcity value as one of the few community banks remaining in northern Florida,” Ramsey said.
Atlantic Coast Financial doubled its earnings in 2015 to an adjusted 18 cents a share, and Ramsey is projecting another year of growth with earnings of 35 cents a share this year.
Patriot revises earnings
Patriot Transportation Holding Inc. last week revised its latest quarterly earnings report to include an expense of $218,000 in professional fees related to “a corporate opportunity that has since been abandoned,” the Jacksonville-based trucking company said in a news release.
Patriot the previous week reported earnings of 46 cents a share for the first quarter ended Dec. 31. With the added fees, its earnings were reduced to 42 cents.
Berkowitz could sell St. Joe shares
As Chairman Bruce Berkowitz touted the potential of The St. Joe Co. last week, his investment fund also filed a shelf registration that would allow it to sell its controlling stake in the real estate development company.
Berkowitz’s Fairholme Capital Management filed the registration statement with the SEC to sell any or all of its 24.5 million St. Joe shares, representing a 32.5 percent stake in the company.
The filing said Fairholme may look to sell shares from time to time but did not indicate any specific plan to sell any.
Meanwhile, Berkowitz last week also released his yearend letter to shareholders about the state of his fund. St. Joe comprises 12.8 percent of the fund’s assets, he said.
“Today, St. Joe stands well capitalized and focused on future developments in Florida’s Bay and Walton Counties,” the letter said.
“We believe that the intrinsic value of St. Joe’s current entitlements and other assets is substantially higher than its recent market price, and were pleased that the company repurchased almost 17 million shares of its common stock (over 18 percent of the outstanding public float) at $18 per share in 2015.”