The stock of Newhall Land & Farming Co. should be riding high.

The Valencia-based land development company recently reported record second-quarter earnings of $45.7 million, nearly triple the earnings for the like period last year.

And the L.A. County Board of Supervisors recently agreed to fast-track the massive Newhall Ranch project in exchange for the company setting aside more open space and building up to 15 percent fewer homes there.

Good news for Newhall Land, but so far the company's stock hasn't responded accordingly.

In the six days following the board's action, it fell 6 percent, from $29.13 to $27.38. And that decline was only the tail end of a 14 percent drop from a July 21 high of $31.69.

So what happened to the expected bounce?

Chalk it up, in part, to a case of bad timing. In recent weeks, real estate stocks have been hit hard in the general market decline, according to Katherine Flores, an associate analyst with Sutro & Co. The fall in real estate stocks started earlier this year with the cooling off of real estate investment trusts.

Also, while Flores views the supervisors' action as "a positive step," she said Wall Street apparently was looking for more.

"Wall Street is really looking for approval of the specific plan, which is still at least three months away," she said. "While that is faster than many expected, a lot could still happen between now and then."

For starters, the company still has to negotiate with county planners exactly how much the project will be scaled back to accommodate the compromise brokered by Supervisor Mike Antonovich that would set aside more land for trails and buffer zones.

The Newhall Ranch project area lies on 19 square miles of unincorporated land extending from Six Flags Magic Mountain on the east to the Ventura County line on the west. The Santa Clara River flows through the property.

Antonovich estimated that the plan would result in 20,850 homes, about 3,500 fewer than planned. But company spokeswoman Marlee Lauffer said that the number of homes has yet to be determined.

"All of these issues are resolvable and we expect to submit our revised plan back to the county by Oct. 27," she said.

Conditional approval for the project could come as early as that Oct. 27 meeting; final approval could come by the end of the year, Lauffer said.

That would be several months ahead of what analysts had originally expected, according to Flores.

"This (final approval) would remove much of the uncertainty that usually surrounds major projects like this," Flores said. "We would expect the stock price to move up on this news."

But neither Flores nor Lauffer discounted the possibility that opponents to the project could file lawsuits challenging the various approvals needed before construction begins. The opponents including the city of Santa Clarita, Ventura County and environmental and slow-growth groups say the project would generate too much traffic and deplete local groundwater supplies.

Whatever the ultimate size, the project would still remain the largest single development proposal in Los Angeles County history. When completed, it would house at least 60,000 people in five "villages," each with its own retail, entertainment and commercial centers.

More importantly for investors, it represents the next stage in earnings for Newhall Land & Farming. The giant land developer owns 37,000 acres of land in and around the Santa Clarita Valley.

Right now, the main earnings driver has been sales of parcels on the company's massive Valencia project, which is about three-fourths of the way to total buildout of 23,000 homes on 15,000 acres of land, Lauffer said. About 13,000 homes have been built to date in and around the city of Valencia, with another 10,000 in various stages of entitlement, she said.

In recent months, Newhall Land & Farming has closed several deals, most notably the sale of its 720,000-square-foot retail center, Valencia Marketplace, to a private investor, for $111 million in cash.

Also, Lauffer said, two large parcels of entitled but unimproved lots have recently sold.

As a result, revenues for the second quarter ended June 30 were $149.3 million, compared with $48.7 million for the like period a year ago. Second-quarter earnings were $45.7 million compared with $17.2 million a year ago.

"The results we're seeing from each of our core businesses reflect the impact of rising population and economic growth in the Santa Clarita Valley and in L.A. County as a whole," Lauffer said. "We expect these trends to continue."

Given these strong sales and the prospect of a fast track for the Newhall Ranch project, Flores has maintained Sutro's rating of "accumulate," which projects a 10 percent return on investment. (A "buy" rating is considered more bullish, with at least a 20 percent return on investment expected.)

"Despite the experience of the last couple weeks, there are still a lot of good things happening with this company," Flores said.

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