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Ocwen (OCN) Incurs Q2 Preliminary Loss, Revenues Decline

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Ocwen Financial Corporation reported preliminary second-quarter 2017 results wherein the company recorded wider-than-expected loss of 36 cents per share. The Zacks Consensus Estimate was pegged at a loss of 19 cents.

However, the reported figure was lower than the prior-year quarter’s loss of 71 cents. Notably, the quarter included several significant items.

Decline in servicing and sub-servicing fees continued to put pressure on revenues, which remains a major near-term concern. However, a decline in operating expenses, indicating continued efforts toward cost control, along with lower interest expenses acted as tailwinds.

The company reported net loss of $44.4 million, narrower than the loss of $87.2 million recorded in the prior-year quarter.

Revenues and Expenses Decrease

Total revenue for the quarter was $311.3 million, down 16.6% 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.

Total expenses declined 27.2% from the prior-year quarter to $280.5 million. This was primarily due to a decrease in all expense components except amortization of mortgage servicing rights costs.

Also, net other expenses decreased 14.2% year over year to $72.4 million, primarily due to lower interest expenses.

As of Jun 30, 2017, Ocwen recorded a cash balance of $251.5 million, down from $256.5 million as of Dec 31, 2016. Total assets were $7.9 billion, slightly up from $7.7 billion as of Dec 31, 2016.

Our Take

Ocwen’s initiatives to restructure servicing portfolio and strategy to diversify revenue sources should help in improving its top line going forward. Also, a strong balance sheet should support its financials in the near term.

However, we remain concerned about the impact of mounting compliance and monitoring expenses, apart from the endless regulatory probes into the company’s near-term financials.

Ocwen Financial Corporation Price, Consensus and EPS Surprise


Ocwen Financial Corporation Price, Consensus and EPS Surprise | Ocwen Financial Corporation Quote

Among the stocks in the same space, LendingTree, Inc.’s (TREE - Free Report) second quarter 2017 earnings per share of 76 cents surpassed the Zacks Consensus Estimate of 73 cents.

Walker & Dunlop, Inc. came out with earnings of $1.08 per share in second-quarter 2017. It outpaced the Zacks Consensus Estimate of $1.04.

TPG Specialty Lending, Inc. (TSLX - Free Report) reported second-quarter 2017 earnings of 57 cents per share. The figure handily beat the Zacks Consensus Estimate of 46 cents.

PHH Corp is scheduled to announce its second-quarter results on Aug 8.

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