Lender Processing (LPS) Could Stay Afloat In Any Housing Market Condition - Barron's (FIS)
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Lender Processing Services (NYSE: LPS) is a services company that focuses on unprocessed, yet-to-be-foreclosed homes, a market that Barron's thinks won't disappear too soon. The company is a spin-off of Fidelity National Information Services (NYSE: FIS) and IPO'd in June 2008 at $30.30 per share.
The mortgage market is expected to still be on the decline. Defaults have increased from 33% of 60-day delinquincies to about 60%.
The two areas that LPS dabbles in are technology, data and analytics, and loan-transaction services. The loan-transaction segment provides outsourced services for all stages of a loan. The growth are is in the handling of defaults, accounting for 66.7% of the segment's $1.3 billion in revs. Technology, data, and analytics segment provides lenders with information related to the loan's that they hold in their portfolio. LPS draws about a $1 fee for each mortgage held in its system. This segment contributes about $570 million to annual revenue.
LPS works with many of the big names in the banking sector. Forty-one of the nation's top-50 banks use some from of LPS' service suite. Additionally, the top 10 of their customers have been with them on average of 19 years.
The company will do well in an up or down market becuase of the spectrum of services that they offer. LPS provides services to about 55% of all mortgage's in the U.S.
Shares of LPS are currently trading at 14x FY09 EPS estimates. The Street sees LPS with an EPS of $3.09 and revs of $2.35 billion for FY09, and increasing to an EPS of $3.46 with revs of $2.56 billion for FY10.
Some risks to LPS' growth start with regualtors and their efforts to mitigated the acceleration of foreclosures. Additionally, LPS carries $1.6 billion in debt, compared to their $4 billion in market cap.
Shadow loans (the unprocessed, yet-to-be-foreclosed homes) have a backlog of 6 million, enough work for a year. The company CEO, Jeff Carbiener, says that they "continue to see increasing delinquency rates -- about 1 million per quarter into the categories of 90 days overdue. There's a heavier contribution of prime loans now going into delinquency....The deterioration is occurring not just in the big four states -- California, Nevada, Arizona and Florida -- but over the last six months in pretty well every state in the union." About 2 million loans that were current at Christmas 2008 are now 60 days overdue. LPS expects an additional 2 to 2.5 million once-current loans to become at least 60 days delinquent through 2010.
The mortgage market is expected to still be on the decline. Defaults have increased from 33% of 60-day delinquincies to about 60%.
The two areas that LPS dabbles in are technology, data and analytics, and loan-transaction services. The loan-transaction segment provides outsourced services for all stages of a loan. The growth are is in the handling of defaults, accounting for 66.7% of the segment's $1.3 billion in revs. Technology, data, and analytics segment provides lenders with information related to the loan's that they hold in their portfolio. LPS draws about a $1 fee for each mortgage held in its system. This segment contributes about $570 million to annual revenue.
LPS works with many of the big names in the banking sector. Forty-one of the nation's top-50 banks use some from of LPS' service suite. Additionally, the top 10 of their customers have been with them on average of 19 years.
The company will do well in an up or down market becuase of the spectrum of services that they offer. LPS provides services to about 55% of all mortgage's in the U.S.
Shares of LPS are currently trading at 14x FY09 EPS estimates. The Street sees LPS with an EPS of $3.09 and revs of $2.35 billion for FY09, and increasing to an EPS of $3.46 with revs of $2.56 billion for FY10.
Some risks to LPS' growth start with regualtors and their efforts to mitigated the acceleration of foreclosures. Additionally, LPS carries $1.6 billion in debt, compared to their $4 billion in market cap.
Shadow loans (the unprocessed, yet-to-be-foreclosed homes) have a backlog of 6 million, enough work for a year. The company CEO, Jeff Carbiener, says that they "continue to see increasing delinquency rates -- about 1 million per quarter into the categories of 90 days overdue. There's a heavier contribution of prime loans now going into delinquency....The deterioration is occurring not just in the big four states -- California, Nevada, Arizona and Florida -- but over the last six months in pretty well every state in the union." About 2 million loans that were current at Christmas 2008 are now 60 days overdue. LPS expects an additional 2 to 2.5 million once-current loans to become at least 60 days delinquent through 2010.
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