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Lender Processing Services Shares Plunged: What You Need to Know

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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: Lender Processing Services (NYSE: LPS  ) dropped 13% in intraday trading today after the company reduced guidance for non-GAAP EPS in the current quarter from a range of $0.79 to $0.82 to a range of $0.54 to $0.56.

So what: The consensus forecast had been calling for non-GAAP EPS of $0.81. The new forecast calls for 31% year-over-year decline in per-share earnings in the current quarter. The company, which processes foreclosures and new home loans, blamed the weakness on fewer defaulted loans and mortgage loan originations, particularly for refinancing.

Now what: Management noted it is "well-positioned to gain additional market share" and plans provide an outlook for the remainder of the year in July, when it reports second-quarter earnings. While foreclosures may pick up in the near term and provide some respite, ultimately the level of foreclosures should fall below current levels. Interest rates are also likely to rise, a negative for refinancing mortgages. Thus, market share gains may not be enough to overcome what management described as "very difficult market conditions."

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Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 17, 2011, at 4:58 PM, c2bfit wrote:

    Wow, you Fools are way off on this one. Just like Reuters, Tribunes, and Cody Willard and others, you're only reporting what you see and not what you (should, but don't) know. Not only will LPS be acquitted of most (if not all) charges/allegations, but as in this article, foreclosures are severly backed up in the pipeline and will be for at least 2 years (not "near term" at all). And yes, they are taking on new market share because their clients actually do understand what's transpired (which is the part you don't know). A "smart" ;-) Fool would be buying this on a 52 week low!

  • Report this Comment On June 17, 2011, at 5:30 PM, Thadman wrote:

    c2bfit, you sure are optimistic that one of the shadiest, most culpable entities involved in robosigning, fee-fraud and other illegal practices that have decimated the mortgage servicing industry is going to overcome its serious legal woes, not to mention it's deeply entrenched culture of corruption, greed, and over-reliance on automated systems over conscious human review. Riiiight.

    Personally, I would criticize this article for focusing too much on external factors like foreclosure volume and interest rates and not nearly enough on the massive corporate liability guillotine poised to fall on this social blight of an organization any day now. We're at a 2-year low today, and unless ole LPS buys more of its own stock like it has already been doing this year, I don't see the price climbing anytime soon.

  • Report this Comment On June 18, 2011, at 5:06 PM, ravens9111 wrote:

    This company will be BK within a year or two once all the lawsuits are finished. The FDIC is suing for 250 million, the Attorney Generals are also suing, and then class action law suits from foreclosure victims will be the nail in the coffin. My guess is that LPS will be forced to repay the majority, if not ALL the fees they collected relating to foreclosures. Given that this segment of their business accounts for 70% of total revenue, they will not be able to repay the judgments or settlements from litigation. The company only has 40 million on its balance sheet. I suspect the total loss from litigation to be at least 1 billion, if not more. The problem here is that the fees that they earned illegally date back to '07.

  • Report this Comment On June 19, 2011, at 1:18 AM, CorpMafia wrote:

    In 2008 & 2009 LPS reported record profits as a result of the foreclosure crisis. As a result company executives made a lot of money and became arrogant and greedy. This arrogance led to risky business decisions and outragous spending. I was employed by LPS for many years and the change in culture was very evident. Employee's were dispensable and so were clients. As the money came in, ethics and integrity went out. I was not surprised I learned about the robo-signing and kickbacks. I was located in a completely seperate division where there were many questionable activities. I am confident a thorough investigation of LPS and all of it's entities would reveal conduct that would make Ken Lay's skin crawl. Considering most of their business is from financial institutions the impact of LPS indiscretions is very damaging to not only their stakeholders but the clients stakeholders. Capitalism won't survive if we can't trust the individuals that run America's corporations. I believe in less is more when it comes to government but in the case of publicly traded companies I don't see any choice but to increase regulations and oversight. LPS is a sinking ship. Dirty business will always come to light.

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Lender Processing… CAPS Rating: ***