Why Nationstar Mortgage Shares Plunged
By Alex Dumortier, CFA
via The Motley Fool
Shares of Nationstar Mortgage (NYSE: NSM ) declined 17.2% on Thursday after the residential mortgage servicer announced third-quarter results that included a laundry list of negative surprises, including an earnings miss and slashed earnings guidance for 2013 and 2014.
Nationstar Mortgage also announced that it is selling its non-core wholesale and distributed retail origination channels to Stonegate Mortgage. As a result of the transaction and other downsizing measures, Nationstar’s head count is expected to fall by some 1,100 employees.
Now what: Nationstar’s negative earnings surprise follows Ocwen Financial’s third-quarter earnings-per-share miss of 60%. As Bloomberg News commented today: “Mortgage origination and servicing companies including Nationstar and Walter Investment are facing increased competition amid falling new loan volumes and fresh rivals.” Long-term investors who anticipate a turn in the cycle (i.e., capital to leave the sector and fees to firm up) may wish to begin looking at Nationstar Mortgage or one of its competitors; however, the prevailing wind is not favorable and riding out the cycle could require much patience, along with a tolerance for volatility.