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First Marblehead Takes a Hit

An analyst downgrades the red-hot stock.

College loan servicing firm

First Marblehead


got hit by an analyst downgrade a day after it reported outsized first-quarter profits.

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A J.P. Morgan analyst on Friday cut his rating on the Boston-based company to neutral from overweight. George A. Sacco Jr. says he's concerned whether the company's third-quarter results are sustainable.

On Thursday, First Marblehead said it earned $141 million, or $2.23 a share, after registering a loss of $5.4 million, or 8 cents a share, a year ago. Service revenue soared to $301.8 million, up from a paltry $35.1 million a year ago.

But the big spike in service revenue came from a widely-publicized $1.39 billion securitization of private student loans. In the first quarter of last year, First Marblehead did not complete any loan securitizations, which is one of its main revenue generators.

Shares of First Marblehead have been on fire this year, more than doubling in price. The stock, however, fell 69 cents on Thursday to close at $70.52.