Ocwen Beats by a Penny – Analyst Blog

On May 4, Ocwen Financial Corporation (OCN) reported first quarter operating earnings per share of 20 cents, a penny higher than the Zacks Consensus Estimate of 19 cents. However, this compares unfavorably with the earnings of 24 cents recorded in the year-ago quarter due to lower share count in the prior year quarter. Net income increased 38.4% to $20.9 million from $15.1 million in the year-ago period.

 

Results were boosted by a major reduction in operating and interest expenses coupled with higher interest income that led to increase in operating income margin. However, this was partially offset by declining top-line growth across all the segments. Overall, the bottom line faired well despite the absence of any revenues associated with the company’s former Ocwen Solutions business due to the August 10, 2009 separation of Altisource Portfolio Solutions S.A.

 

Total revenue declined 34% year over year to $75.6 million. Servicing and sub-servicing fees decreased 15.6% year over year to $66.5 million, process management fees decreased 76.6% year over year to $7.9 million and other revenues declined 42.9% to $1.2 million.

 

However, operating expenses decreased drastically by 51.3% year over year to $35.2 million and interest expense declined 25.1% year over year to $12.5 million. Interest income increased 68.2% year over year to $3.6 million. As a result, operating margin increased to 53% from 50% in the prior quarter.

 

At March 31, 2010, Ocwen recorded cash of $300 million compared with $90.9 million at December 31, 2009 and debt securities of $82.6 million compared with $95.6 million recorded at the end of the prior quarter.

 

 

On March 29, 2010, Ocwen entered into agreements to acquire the rights to service $6.9 billion in unpaid principal balance (UPB). The acquisitions were completed on May 3, 2010. With this, the company has successfully acquired $23.5 billion of servicing and sub-servicing contracts over the past four quarters, one of the highest ever in twelve-month periods. This has also helped in increasing the servicing portfolio by 35% year over year to $55.1 billion at the end of the reported quarter.

 

During the reported quarter, Ocwen completed 19,612 modifications, thereby exceeding the top end of the previous guidance of 12,500−17,500 modifications. This increased 25% over the prior quarter and included 6,312 Home Affordable Modification Program (HAMP) modifications.