PHH Q4 Profit Declines; To Explore Options For Fleet, Mortgage Businesses

(RTTNews) - PHH Corp. (PHH), a provider of business process management services for the mortgage and fleet industries, on Tuesday reported a 22 percent decline in profit for the fourth quarter from last year, reflecting lower revenues.

Mount Laurel, New Jersey-based PHH also said it is exploring ways to maximize shareholder value through the separation of its fleet business, mortgage business, or both. Shares of the company gained more than 7 percent in extended trades.

For the fourth quarter, net income attributable to the company was $45 million or $0.67 per share, down from $58 million or $0.89 per share in the same period last year. The latest quarter's results include severance costs of $0.13 per basic share after tax related to capacity reductions in the Mortgage Production segment.

Core earnings per share for the quarter were $0.28, compared to $0.81 in the year-ago period. On average, seven analysts polled by Thomson Reuters expected the company to earn $0.13 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter declined 14 percent to $675 million from $783 million in the same period last year, but beat analysts' consensus revenue estimate of $636.43 million.

Mortgage fees for the quarter declined 35 percent to $60 million and net fee income decreased 22 percent to $105 million. Fixed management fees edged up to $45 million and fleet lease income rose 6 percent to $372 million.

Mortgage applications for the quarter declined 40 percent from the year-ago period, while interest rate lock commitments or IRLCs expected to close declined 66 percent from last year.

Mortgage closings in the quarter declined 34 percent from the year-ago period to $9.5 billion. Fee-based closings continued to trend higher, increasing to 61 percent of total closings from 41 percent in the year-ago period.

For fiscal 2013, net income attributable to PHH Corp was $135 million or $2.06 per share, up sharply from $34 million or $0.56 per share in the previous year. However, core loss was $0.32 per share, compared to core earnings of $2.96 per share in the prior year. Net revenues for the year grew 4 percent to $2.84 billion from $2.74 billion last year.

Street expected the company to earn $1.43 per share for the year on revenues of $2.80 billion.

Total loan servicing portfolio as at December 31, 2013 was $226.8 billion, up 23 percent from $183.7 billion at the end of 2012.

PHH Corp. said it has retained J.P. Morgan Securities LLC, Centerview Partners LLC and Kirkland & Ellis LLP to assist in the process for separation or sale of its fleet business, mortgage business, or both.

Glen Messina, president and CEO of PHH Corp. said, "Our decision to explore a separation or sale of our businesses reflects our determination to maximize shareholder value. We appreciate the constructive input we have received from Orange Capital and our other shareholders in this regard."

PHH closed Tuesday's regular trading session at $24.23, down $0.65 or 2.61 percent on a volume of 1.99 million shares. However, in after-hours, the stock gained $1.72 or 7.10 percent to $25.95.