On Jun 4, 2013, we reiterated our long-term recommendation on
Ocwen Financial Corp
) at Neutral based on its new business acquisitions and improved
first- quarter results. However, we remain concerned about the
company's mounting expenses.
ELLINGTON FINL (EFC): Free Stock Analysis
HOME LOAN SERVC (HLSS): Free Stock Analysis
NUSTAR GP HLDGS (NSH): Free Stock Analysis
OCWEN FINL CORP (OCN): Free Stock Analysis
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Why the Neutral Stance?
Ocwen's first-quarter 2013 adjusted earnings came in at 64 cents
per share, up significantly from 25 cents in the prior-year
quarter. On a year-over-year basis, the results benefited from
impressive top-line growth and a rise in interest income,
partially offset by increased operating and interest expenses.
Moreover, a strong balance sheet and favorable liquidity were the
tailwinds for the quarter.
The Zacks Consensus Estimate for 2013 went down by 1.8% to $4.33
in the last 30 days. However, for 2014, the Zacks Consensus
Estimate went up 1.2% to $5.22 per share over the same time
frame. The company currently has a Zacks Rank #3 (Hold).
Over the last few years, Ocwen has expanded through acquisitions,
mergers and alliances. Further, Ocwen's growth plan is focused on
core operations, increasing fee-based revenues, intensifying
unsecured debt collection business and diversifying its business
through new ventures.
Alongside, Ocwen is focused on developing its Servicing segment
by expanding the segment's capabilities through reverse mortgages
and home equity lines of credit.
All these factors are expected to improve the company's revenue
generation capacity in the long run.
On the other hand, Ocwen is exposed to increased obligation,
several one-time expenses and allocated burden of probable losses
due to its continuous acquisitions. Additionally, interest
expenses are expected to rise based on increasing funding
requirements. This is anticipated to pressurize the company's
bottom line in the near-to-medium term.
Moreover, a persistently weak capital market, slow economic
recovery, rising expenses and new regulations are expected to
adversely affect the financials of the company going forward.
Other Stocks to consider
Some better performing stocks include
Home Loan Servicing Solutions, Ltd
NuStar GP Holdings, LLC
) with a Zacks Rank #1 (Strong Buy) and
Ellington Financial LLC
) with a Zacks Rank #2 (Buy).