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Compass Point downgrades Walter Investment to sell

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Walter Investment Management (WAC) took a second hit in as many days, as Compass Point Trading & Research has downgraded the stock to “sell” and the target price lowered to $23 with margin pressure through the rest of 2014.

This comes a day after news that Walter subsidiary Green Tree Servicing failed eight of 29 compliance tests administered by the Office of Mortgage Settlement Oversight.

Compass Point downgrades WAC to Sell from Neutral and lowers their tgt to $23 from $28 following the 1Q14 earnings result. WAC reported a blowout core operating EPS of $1.53 compared to the consensus estimate of $0.96 and our estimate of $0.75, but there were a considerable amount of adjustments and one-timers that may make it difficult for WAC to repeat this performance again next quarter. Series of outsized items may have skewed the operating results, such as lower compensating interest expense and an outsized decline in amortization.

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