Ocwen Financial surged following the release of its preliminary results for the first quarter of 2015. The company also received a positive recommendation from analysts at Sterne Agee.
The shares of Ocwen Financial are trading $10.41 per share, up by more than 22% at the time of this writing, around 12:50 in the afternoon in New York.
Ocwen Financial preliminary operating results
Ocwen Financial reported a preliminary net income of $34.4 million or $0.27 per share. Its preliminary revenue was $510.4 million for the first quarter. Wall Street analysts expected the financial services holding company to report $0.13 in earnings per share on $488 million in revenue.
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The company’s preliminary income from operations was $132.1 million, and preliminary cash flow from operating activities was $323 million for the quarter.
In a statement, Ocwen Financial CEO Ron Farris said,”I am proud of what we have accomplished as far as managing the business through this difficult transition period. We made great progress on our asset sale strategy, have returned to profitability and continue to generate substantial operating cash flow. However, I am not satisfied with only making $34 million in the quarter. We intend to do better.”
Ocwen Financial released its operating results as preliminary since its auditors raised concerns regarding its ability to sustain its business. During a conference call with analysts and investors, Farris emphasized that the opinion of its auditors should not have a significant on the company’s business operations, and would not breach any of its debt agreements.
Farris said, “A going concern explanatory paragraph if that were to be the result, will not cause a default under any or our debt agreements.”
In March, Ocwen Financial disclosed that it received a deficiency letter from the New York Stock Exchange (NYSE) regulation due to its non-compliance with the continued listing standards. The company failed to submit its 2014 Form 10-K on time.
The company plans to file its 2014 Form 10-K and first quarter 2015 Form 10 Q by May 29.
Analyst boosts Ocwen Financial’s stock rating and price target
Analysts at Sterne Agee boosted their rating for the shares of Ocwen Financial from Neutral to Buy. They also increased their price target for the stock from $10 to $12 per share.
In addition, the analysts also raised their 2015 EPS estimate for Ocwen Financial from $0.12 to $0.66. They also estimated that the company will deliver an EPS of $0.95 in 2016.
“We are expecting servicing revenue to remain above 38 bps of servicing balances and servicing cost to move from what we estimate to be 30 bps of servicing to 20 bps over the next 2-4 quarters. Interest expense, the one area where we will need the March 10Q to come up with a more accurate assessment of future cost, should continue to decline,” according to the analysts.