On Aug 9, Zacks Investment Research upgraded Nationstar Mortgage Holdings Inc. (NSM) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Nationstar Mortgage has been witnessing rising earnings estimates on the back of strong second-quarter 2013 results. Moreover, this well-known residential mortgage loan servicer delivered positive earnings surprises in the last 4 quarters with an average beat of 21.8%. The long-term expected earnings growth rate for this stock is 13%.
Nationstar Mortgage reported its second-quarter results on Aug 6 with earnings per share of $1.50, substantially beating the Zacks Consensus Estimate of 97 cents by 54.6% and rising more than threefold from the year-ago earnings of 44 cents. Robust results for the reported quarter were primarily aided by elevated total revenues, partially offset by higher expenses.
Total revenues more than doubled from the year-ago period and stood at $603.7 million. This upsurge reflected growth in fee income and gain on mortgage loans held for sale.
However, on the downside, expenses more than doubled to $339.9 million, as compared with the prior-year period.
During the quarter, Nationstar Mortgage completed the acquisition of the mortgage origination business of Greenlight Financial Services for $75 million. The company expects Greenlight to originate more than $8 billion on an annual basis.
Following second-quarter 2013 results, the Zacks Consensus Estimate for 2013 increased 5.5% to $4.63 per share on the back of 4 of the 6 upward revisions, over the last 7 days. For 2014, the Zacks Consensus Estimate advanced 0.9% to $7.00 per share with 2 of the 6 estimates moving north over the same time period.
Other Stocks to Consider
Besides Nationstar Mortgage, other stocks in the same industry with a Zacks Rank #1 include Home Loan Servicing Solutions, Ltd. (HLSS), while Ocwen Financial Corp. (OCN) and Hercules Technology Growth Capital, Inc. (HTGC) carrying a Zacks Rank #2 (Buy) are also worth considering.
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