Nationstar Holdings posts $48.3M loss in first quarter

Lower servicing revenue proves heavy drag

Nationstar Mortgage Holdings (NSM) reported a first-quarter loss of $48.3 million, after reporting a profit in the same period a year earlier.

The earnings per share loss of $0.53 contrasts with the gains of $0.21 reported last year. Revenue for the quarter came in at $215.1 million, versus $295.8 million reported last year.

GAAP EPS decreased sequentially principally due to a $110 million, or $0.77 per share, non-cash decrease in fair value mark-to-market adjustments in the servicing segment and a $17 million non-cash, or $0.12 per share, quarterly increase in amortization partially offset by an increase in earnings from the originations business.

Earnings, adjusted for non-recurring costs, were 24 cents per share. The results fell short of analyst expectations, who expected as high as a gain of $0.72 per share.

“The primary drivers behind the weaker quarter included a decline in contribution from SolutionStar and higher amortization & other related cost at the servicing unit, relative to 4Q14,” say Sterne Agee analysts Henry Coffey and Jason Weaver. “At SolutionStar, revenues increased from $88 million in 4Q14 to $112 million in the current quarter, but contribution fell from $34 to $32 million.

“This is the third core EPS miss in row and we expect to see the shares trade lower,” they say in a client note.

Nationstar shares have declined 7% since the beginning of the year. The stock has dropped 18% in the last 12 months.

The Servicing segment revenue of $109 million fell 49% from Q4, mostly due to higher prepayments as rates fell. Adjusted operating income of $99 million was down 27%. Operating margin of 10.3% down 390 basis points. Ending UPB of $390B up 2%.

The Solutionstar segment real estate exchange had revenue of $49 million up 17% quarter over quarter. Real estate services revenue was $63 million, up 37%. Pretax income of $32 million was down 6%.

A pretax margin of 29% was down 1,000 basis points as a higher mix of business came from real estate services. 5,483 properties sold, down 1%.

The Originations segment saw revenue of $158 million, up 9% from the fourth quarter.

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