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Lender Processing Services (LPS)

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Lender Processing Services' (LPS) second-quarter 2011 results were a mixed bag. Although Lender Processing surpassed the Zacks Consensus Estimate, growth slowed year over year. We are concerned about the high debt on its balance sheet as well as challenging origination and default market. There is a possibility of further foreclosure delays.

Moreover, the company is anticipating near-term challenges on account of significant changes in the origination volumes. Hence, we maintain our Underperform recommendation on the shares.

Our six-month target price of $15.00 equates to about 6.3x our estimate for 2011. The target price implies an expected total negative return of 10.6% over that period.

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