Why Nationstar's Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mortgage servicer Nationstar Mortgage Holdings (NYS: NSM) fell as much as 10% today after missing estimates on earnings per share for its most recent quarter. This comes on the heels of reports that paint a picture of fierce competition in the mortgage-servicing industry for valuable mortgage-servicing portfolios.

So what: Nationstar's EPS, at $0.61, is significantly better than the $0.04 EPS loss in the year-ago quarter. Without one-time drags on the bottom line, Nationstar had $0.64 in adjusted EPS, still a penny below what analysts had expected. Revenue, at $277.2 million, was better than the consensus estimate of $268.9 million.


Nationstar has been in competition for several large mortgage-servicing portfolios, and it missed out on acquiring MetLife's (NYS: MET) portfolio, which was sold to JPMorgan Chase (NYS: JPM) yesterday. That hurt Nationstar, as did an earlier loss of Ally Financial's Residential Capital servicing business, which Ocwen Financial (NYS: OCN) won after an intense bidding process.

Now what: Nationstar CEO Jay Bray remains confident that the company can achieve significant organic growth, and the tripling in revenue from the year-ago quarter attests to that possibility. However, Nationstar's loss of multiple large acquisition opportunities also points to threats on the horizon, as organic growth may run up against a wall of consolidation. The successful acquisition of a large mortgage-servicing portfolio may be the most important near-term action Nationstar can take to reverse its recent slide.

Want more news and updates? Add Nationstar to your Watchlist now.

The article Why Nationstar's Shares Sank originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of JPMorgan Chase. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum