Standard & Poor's Ratings Services ("S&P") upgraded
the outlook on
) to positive from stable, according to Reuters. The corporate
credit rating of the company is maintained at 'BB'.
The outlook upgrade came on the back of S&P's expectation
that CoreLogic will continue to deliver steady earnings and
sustain its modest financial policies.
The rating affirmation accounts for CoreLogic's dominant foothold
in the mortgage processing market as well as its continued effort
to lower costs, which in turn helps it to accelerate earnings.
Nevertheless, these positives are dwarfed by restricted financial
institution clientele and expected lower U.S. mortgage
originations in the next year.
The rating also incorporates S&P's expectation of leverage
hovering in the 2.5x range and CoreLogic's cash deployment
agenda. Over the last 12 months, CoreLogic paid back $114 million
in debt that helped financial leverage to decline 120 basis
points to 2.6x in September 2012 from 2011 end level.
S&P estimates CoreLogic's revenue to remain flat in the next
three years with EBITDA margin in the mid 20% range. It expects
data analytics revenue to register continuous improvement while
mortgage originations business to slow down.
The rating agency also noted the company's liquidity is
sufficient for meeting expenditures. At September 2012 end,
it had cash balances of $155 million, free cash flow and about
$500 million available under a $550 million revolving credit
facility due 2016.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence in the stock
as well as maintaining creditworthiness in the market. We believe
the company's strong score with the credit rating agencies will
help it write more business going forward.
S&P stated that the ratings could be upgraded if CoreLogic
continues to post steady revenue and EBITDA in 2013. The rating
agency anticipates mortgage origination to remain constrained
next year. Also, CoreLogic's ability to sustain modest financial
policies will drive rating upgrade.
On the flip side, if the company fails to meet expectations, the
outlook might be subject to downgrade.
CoreLogic carries a Zacks #1 Rank that translates into a
short-term Strong Buy rating.
Lender Processing Services, Inc.
), which competes with CoreLogic, carries a Zacks #3 rank,
implying a short-term Hold rating.
CORELOGIC INC (CLGX): Free Stock Analysis
LENDER PROC SVC (LPS): Free Stock Analysis
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