LPS' Adjusted EPS Beats Estimates

Zacks

Lender Processing Services, Inc (LPS) reported fourth quarter 2012 net earnings of $2.8 million or 3 cents share versus a net loss of $21.2 million or 25 cents per share in the year-ago quarter. For full year 2012, GAAP earnings stood at $70.4 million or 83 cents per share versus $96.5 million or $1.13 per share in the previous year.

Adjusted earnings were $62.8 million or 74 cents per share in the reported quarter versus $60.4 million or 72 cents per share in the year-ago quarter. The quarterly adjusted earnings beat the Zacks Consensus Estimate of 67 cents.

For full year 2012, adjusted earnings stood at $236.8 million or $2.80 per share versus $228.9 million or $2.68 per share in the preceding year. The yearly adjusted earnings beat the Zacks Consensus Estimate of $2.73.

The company reported revenues of $501.0 million in fourth quarter 2012, down 2.1% year over year, driven by lower Default Services revenues, partially offset by higher revenue in Technology, Data, and Analytics (TD&A) and Origination Services. The quarterly revenues beat the Zacks Consensus Estimate of $488 million.

For full year 2012, total revenue was $2.0 billion, up 0.7% year over year, due to increased revenues from Origination Services and TD&A, partially offset by lower revenue from Default Services.
 
Segment Performance

Fourth-quarter revenues for the TD&A segment were $189.3 million, up 7.8% year over year. The growth was attributable to increase in revenues across all business lines. Adjusted operating income for the segment was $54.8 million versus $57.6 million in the year-ago quarter. The downside was due to higher expenses.

Revenues for the Transaction segment fell 7.7% from the prior-year quarter to $311.7 million. The downside in revenues was primarily due to 26.0% drop in Default Services revenue, partially offset by 14.8% increase from Origination Services. Overall adjusted operating income for the segment stood at $67.4 million versus $70.7 million in the year-ago quarter.

Liquidity

At year-end 2012, cash and cash equivalents of the company was $236.2 million versus $77.4 million in the year-ago period.  As of Dec, 2012, net cash provided by operating activities stood at $434.5 million versus $477.8 million in the year-ago quarter.

Outlook

For the first quarter of 2013, management expects adjusted earnings per share in the range of 63 cents–67 cents with revenues of $460 million–$480 million.

Lender Processing is well positioned to enhance the mortgage value chain and deliver innovative technology, data and expertise to its clients. Going forward, the rapidly growing mortgage landscape continues to create new requirements for its clients.  Also, the recent conclusions of many of the company’s legal matters allow it to focus more on growth and innovation to create new opportunities for the company .

However, the company needs to be wary of intense competition from industry bigwigs, which include formidable names such as Heartland Payment Systems Inc (HPY), Equifax Inc (EFX), and Fidelity National Information services, Inc  (FIS), all carrying a Zacks Rank #2 (Buy). However, Lender Processing currently has a Zacks Rank #4 (Sell).

 

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