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Why Is Ocwen Financial (OCN) Up 4.7% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Ocwen Financial Corporation (OCN - Free Report) . Shares have added about 4.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ocwen Reports Wider-Than-Expected Loss in Q1
Ocwen Financial released preliminary first-quarter 2017 wider-than-expected loss of $0.26 per share. The Zacks Consensus Estimate was pegged at a loss of $0.22.
However, the reported loss was lower than the prior-year quarter’s loss of $0.90 per share. Notably, the quarter included several significant items.
Decline in servicing and sub-servicing fees continued to put pressure on revenues, which remains a near-term concern. However, a decline in operating expenses, indicating continued efforts towards cost control, along with lower interest expenses acted as tailwinds.
The company reported net loss of $32.6 million, narrower than the loss of $111.2 million recorded in the prior-year quarter.
Revenues and Expenses Decrease
Total revenue for the quarter was $321.9 million, down 2.7% year over year. Lower servicing and sub-servicing fees were partially offset by a rise in net gain on loans held for sale and other revenues. However, the figure surpassed the Zacks Consensus Estimate of $300.6 million.
Total expenses decreased 15.9% year over year to $276.4 million. This was primarily due to a decrease in all expense components except technology and communications, and other expenses.
Also, net other expenses decreased 27.1% year over year to $76 million, primarily due to lower interest expense.
As of Mar 31, 2017, Ocwen recorded a cash balance of $268.3 million, up from $256.5 million as of Dec 31, 2016. Also, total assets were $7.9 billion, slightly up from $7.7 billion as of Dec 31, 2016.
Outlook
Management believes that if the New Residential transaction is successfully completed, Ocwen will receive annual subservicing fees of nearly 13 basis points (bps), down from 25 bps currently being received under the existing HLSS arrangement.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month. The consensus estimate has shifted by 8% due to these changes.
At this time, Ocwen Financial's stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'C'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We expect above average returns from the stock in the next few months.
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Why Is Ocwen Financial (OCN) Up 4.7% Since the Last Earnings Report?
It has been about a month since the last earnings report for Ocwen Financial Corporation (OCN - Free Report) . Shares have added about 4.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ocwen Reports Wider-Than-Expected Loss in Q1
Ocwen Financial released preliminary first-quarter 2017 wider-than-expected loss of $0.26 per share. The Zacks Consensus Estimate was pegged at a loss of $0.22.
However, the reported loss was lower than the prior-year quarter’s loss of $0.90 per share. Notably, the quarter included several significant items.
Decline in servicing and sub-servicing fees continued to put pressure on revenues, which remains a near-term concern. However, a decline in operating expenses, indicating continued efforts towards cost control, along with lower interest expenses acted as tailwinds.
The company reported net loss of $32.6 million, narrower than the loss of $111.2 million recorded in the prior-year quarter.
Revenues and Expenses Decrease
Total revenue for the quarter was $321.9 million, down 2.7% year over year. Lower servicing and sub-servicing fees were partially offset by a rise in net gain on loans held for sale and other revenues. However, the figure surpassed the Zacks Consensus Estimate of $300.6 million.
Total expenses decreased 15.9% year over year to $276.4 million. This was primarily due to a decrease in all expense components except technology and communications, and other expenses.
Also, net other expenses decreased 27.1% year over year to $76 million, primarily due to lower interest expense.
As of Mar 31, 2017, Ocwen recorded a cash balance of $268.3 million, up from $256.5 million as of Dec 31, 2016. Also, total assets were $7.9 billion, slightly up from $7.7 billion as of Dec 31, 2016.
Outlook
Management believes that if the New Residential transaction is successfully completed, Ocwen will receive annual subservicing fees of nearly 13 basis points (bps), down from 25 bps currently being received under the existing HLSS arrangement.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month. The consensus estimate has shifted by 8% due to these changes.
Ocwen Financial Corporation Price and Consensus
Ocwen Financial Corporation Price and Consensus | Ocwen Financial Corporation Quote
VGM Scores
At this time, Ocwen Financial's stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'C'. The stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We expect above average returns from the stock in the next few months.