Lender Processing Services Inc.
) reported second-quarter 2012 adjusted earnings per share of 76
cents, which comfortably surpassed the Zacks Consensus Estimate of
60 cents. Earnings per share spiked 36% from the year-ago level.
On a GAAP basis, loss per share was 45 cents, down from the
earnings of 25 cents recorded in the year-earlier quarter. An
increase to the legal and regulatory reserve hurt Lender
Processing's GAAP earnings.
The company's total revenue increased 6.7% year over year to $533.2
million, edging past the Zacks Consensus Estimate of $511.0
Operating income in the quarter increased 34.4% year over year to
$121.7 million mainly.
Technology, Data and Analytics Segment (TD&A)
Second-quarter revenues for the TD&A segment were $186.1
million, up 9.1% year over year; thanks to the growth in Servicing
Technology from higher recurring revenue and data access fees. The
growth was also attributable to higher refinancing volumes in
Origination Technology as well as to the completion of a year of
new customer implementations in Default Technology initiated in
Adjusted operating income for the segment was $57.9 million, up
3.2% year over year. The upside can be credited to higher
contributions from Servicing and Default Technology offset somewhat
by lower profit from Data and Analytics.
Transaction Services Segment
Second-quarter revenues for the Transaction segment grew 5.1% year
over year to $347.4 million. The upside in the segment's revenues
can be traced back to revenue increases of a substantial 42.4% from
Origination Services revenue partially marred by 12.5% decline from
The performance in Default Services was hit by lower transaction
volumes while the performance in Origination Services was buoyed by
higher refinance origination volumes. In the reported quarter,
Origination Services and Default Services recorded revenues of
$150.7 million and $196.6 million, respectively.
Overall adjusted operating income for the segment inflated 41.6%
year over year to $76.0 million mainly due to higher operating
leverage as well as higher origination volumes.
At quarter end, cash balance of the company was $138.5 million
while long-term debt, net of current portion was $1.1 billion.
For the third quarter of 2012, management expects adjusted earnings
per share within 68-72 cents. Management expects revenues to remain
in the range of $500-$520 million.
We remain impressed with the growth trajectory Lender Processing
has embarked on. The company outdid the consensus in the second
quarter on the back of improved revenue. Its origination business
is marching ahead. While 2012 looks to be another challenging year,
management remains focused on expanding market share, leverage
strong cash flow and position itself to capitalize on market
recovery once it rebounds. However, its Default services revenue
continues to pose a challenge for it.
Lender Processing, which competes with
FTI Consulting Inc.
), currently carries a Zacks #2 Rank, which translates into a
short-term Buy rating. We are maintaining our long-term Neutral
recommendation on the stock.
FTI CONSULTING (FCN): Free Stock Analysis
LENDER PROC SVC (LPS): Free Stock Analysis
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