Compass Point Upgrades Ocwen Financial Corp (OCN) to Neutral

Compass Point upgraded Ocwen Financial Corp (NYSE: OCN) from Sell to Neutral with a price target of $6.00 following the 2Q15 earnings release and as shares approach their price target.

Analyst Kevin Barker commented, "The stock is down 40%+ from recent highs and is now trading at 0.7x 2Q15 TBV. At these levels, we believe most of the near-term headwinds have been priced into the stock and the major litigation overhang from Gibbs & Bruns will likely either be settled for a palpable amount or be kicked around in the courts for several years. Other regulatory overhangs remain from CA and the CFPB, and we expect OCN to take charges to settle these claims but these are largely priced into the stock. Hence, we believe the potential gains from staying short the stock as largely played out. We still have little visibility on when OCN will produce positive GAAP earnings and the company needs to make significant progress in right-sizing its operations before we would consider buying the stock, but with the stock trading at 0.7x of TBV the near-term headwinds are priced in. Over the next year, we expect TBV to decline to the $7.25-$7.50 range absent any major regulatory/litigation settlements before the company can effectively right-size their operations to start reporting an operating profit. Longer-term, we would need to see the company reduce the regulatory overhang, put Gibbs & Bruns litigation behind the company and show it can consistently report operating profits before we get constructive on the stock. We have also made some slight adjustments to our FY15E operating EPS to ($0.49) from ($0.53) and FY16E operating EPS to ($0.28) from ($0.37) due to slightly higher ancillary service fees."

For an analyst ratings summary and ratings history on Ocwen Financial Corp click here. For more ratings news on Ocwen Financial Corp click here.

Shares of Ocwen Financial Corp closed at $6.68 yesterday.

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