Why Ocwen Financial (OCN) Stock Is Down Today

NEW YORK (TheStreet) -- Ocwen Financial (OCN) was falling -7% to $33.25 Thursday after missing analysts' estimates for earnings and revenue in the first quarter.

For the first quarter Ocwen reported earnings of 54 cents a share, missing the Capital IQ Consensus Estimate of $1 a share by 46 cents. Revenue grew 36% from the year-ago quarter to $553 million. Analysts expected revenue of $570.58 million in the quarter.

"Ocwen continues to work cooperatively with the New York Department of Financial Services to address their concerns that led to an indefinite hold on our Wells Fargo transaction," president and CEO Ron Faris said. "We believe that increased regulatory scrutiny will, over time, benefit the industry and Ocwen by building greater confidence in the system and rewarding those with efficient and effective servicing processes. Nevertheless, new requirements and the associated investments have raised costs for the industry, including Ocwen."

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TheStreet Ratings team rates OCWEN FINANCIAL CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate OCWEN FINANCIAL CORP (OCN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OCN's very impressive revenue growth greatly exceeded the industry average of 29.8%. Since the same quarter one year prior, revenues leaped by 140.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, OCWEN FINANCIAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • In its most recent trading session, OCN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • Net operating cash flow has significantly decreased to -$153.29 million or 140.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: OCN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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