Shares of Ocwen Financial Corp. OCN rose nearly 21% after the company released first-quarter 2015 earnings results on a preliminary basis on Apr 30, after the market closed. Ocwen reported preliminary adjusted earnings of 13 cents per share, which came in line with the Zacks Consensus Estimate. However, the figure was 70% below the year-ago quarter earnings.
Earnings for the quarter were adjusted for a $26.9 million gain from the sale of Federal Home Loan Mortgage Corporation FMCC performing loan mortgage servicing rights (“MSRs”) and a $12.9 million gain on the sale of certain legacy performing and non-performing whole loans along with certain impairment charges and expenses.
Though results reflected decline on a year-over-year basis, shares of Ocwen gained over the positive market sentiments due to the company posting profits in the quarter after recording losses in 2014.
After considering the abovementioned non-recurring items, net income attributable to Ocwen stood at $34.4 million or 27 cents per share, down from $59.5 million or 43 cents per share in the prior-year quarter.
Performance Details
Total revenue on a preliminary basis fell 7.4% year over year to $510.4 million. The reduction was due to lower servicing and sub-servicing fees, partially offset by a rise in net gain on loans held for sale as well as other revenues.
Operating expenses on a preliminary basis rose 8.4% year over year to $378.4 million. The increase was driven by higher servicing and origination costs, professional services fees as well as technology and communications expenses. However, these were slightly offset by a reduction in amortization of mortgage servicing rights, occupancy and equipment costs as well as other expenses.
Net other expenses on a preliminary basis declined 31.5% year over year to $89.3 million.
Income from operations came in at $132.1 million, down 34.6% from the prior-year quarter.
Balance Sheet
As of Mar 31, 2015, Ocwen recorded a cash balance of $242.3 million on a preliminary basis, up from $129.5 million as of Dec 31, 2014. Further, total assets on a preliminary basis stood at $8.3 billion, up from $8.2 billion as of Dec 31, 2014.
Our Take
Ocwen expects to generate profits this year by extending its advance receivable facility, meeting the regulatory requirements, executing its plan to reduce GSE servicing exposure, complying with debt covenants and maintaining the current servicer ratings.
However, the company’s troubled profitability after a prolonged period of regulatory issues may take considerable time to reach its previous level.
Currently, Ocwen carries a Zacks Rank #4 (Sell). Other mortgage investment firms like Nationstar Mortgage Holdings Inc. NSM and Ellington Financial LLC EFC are scheduled to report earnings results on May 5 and May 6, respectively.
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