The St. Joe Company (JOE), a publicly-held operationally diversified real estate company, has recently entered into a new pulpwood supply agreement with Smurfit-Stone Container Corporation to strengthen its long-term relationship and optimize its earnings from the forestry segment.
Under the terms of the mutually beneficial deal, St. Joe would provide 3.9 million tons of pulpwood to the pulp and paper mill of Smurfit-Stone in Panama City, Florida, over the next seven years. The new agreement is applicable with immediate effect and replaces the existing contract between the two companies entered in July 2000 and scheduled for termination in June 2012.
With the new agreement, St. Joe has gained relatively favorable pricing terms for its supply and has ensured a steady demand for its pulpwood for the next seven years. In addition, the deal also provides for greater flexibility to St. Joe related to its rural land sales activities. On the other hand, the new agreement provides a steady supply of raw materials to Smurfit-Stone to meet the increasing demands of its pulp and paper mill. Consequently, the deal is a win-win outcome for both the companies.
St. Joe is one of the largest real estate developers in Florida. The company has recently announced the opening of the Northwest Florida Beaches International Airport, which it has developed. This is the first new international airport opened in the U.S. since the 2001 terrorist attack, and is expected to become a major growth driver for the region. The airport greatly increases the future value of its holdings, and provides an upside potential for St. Joe.
Currently, St. Joe carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We maintain our long-term Neutral rating on St. Joe.
We also have a long-term Neutral recommendation and a Zacks #3 Rank for Rayonier Inc. (RYN), one of the competitors of St. Joe.
ST JOE CO (JOE): Free Stock Analysis Report
RAYONIER INC (RYN): Free Stock Analysis Report
Zacks Investment Research
