On Sep 18, Zacks Investment Research upgraded Home Loan Servicing Solutions, Ltd. (HLSS) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Home Loan Servicing’s rank upgrade was triggered by the company’s strengthening fundamentals and appreciable top-line growth. Moreover, the company delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 18%. The long-term expected earnings growth rate for this stock is 8.4%.
Home Loan Servicing’s commendable growth tale can be witnessed in the 75.3% rise in total revenues in the first half of 2014 compared with the corresponding prior-year period. Moreover, interest income on the Notes receivable – Rights to Mortgage Servicing Rights (MSRs), which is the company’s primary source of income, reflected a 66.4% increase halfway through 2014.
This mortgage investment company initiated its operations in 2012 and has the target to return maximum capital to shareholders in the form of monthly cash dividends. In Apr 2014, the company hiked its dividend per common share by 6.7% followed by a raise of 12.5% in Aug 2014.
Home Loan Servicing possesses the potential to deliver a solid performance on the back of its expanding loan portfolio and improving credit quality. Moreover, the company’s favorable earnings expectations for the third quarter along with the gradually improving economy further reinforce confidence in the company’s fundamentals.
The positive sentiment has been reflected in the earnings estimate revisions. Though the Zacks Consensus Estimate remained flat for 2015 at $2.31 per share over the last 60 days, it increased 2.4% to $2.52 per share for 2014 over the same time period.
Other Stocks to Consider
Other finance stocks worth considering include Essent Group Ltd. (ESNT), S&T Bancorp Inc. (STBA) and Territorial Bancorp Inc. (TBNK). All these stocks sport the same Zacks Rank as Home Loan Servicing.
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