What risks should investors watch in TRC's earnings?

**Investors in Tejon Ranch Co. (TRC) should monitor risks related to revenue shortfalls and earnings misses, although the likelihood of these risks may be low based on the current financial outlook.** Here's an analysis of the key risks:

1. **Revenue Shortfall Risk**: Tejon Ranch has experienced a decline in total revenues, from $44.739 million in 2023 to $41.886 million in 2024. The primary reason for this decrease is the lower mineral resources revenue, specifically from water sales, due to above-average rainfall years in California. While this trend may reverse if weather conditions change, investors should be aware of the company's reliance on water sales and potential fluctuations in this revenue stream.
2. **Earnings Miss Risk**: The company's net income attributable to common stockholders decreased from $3.265 million in 2023 to $2.690 million in 2024. This decline is primarily due to reduced mineral resource segment operating income and increased farming segment expenses. Investors should watch for potential earnings misses if these factors continue to affect profitability. However, the fourth quarter of 2024 showed a significant increase in net income, with a 186% rise to $4.5 million, indicating a strong rebound and potential for positive earnings surprises.

In conclusion, while there is a risk of revenue shortfalls and earnings misses due to weather-dependent revenue streams and increased expenses, investors should also be aware of the potential for positive earnings surprises as the company shows strong quarterly performance. It is advisable to monitor the company's water sales and farming segment expenses closely, as well as the progress of its real estate developments, which could impact future earnings.