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Why Nationstar’s Shares Sank

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What: Shares of mortgage servicer Nationstar Mortgage Holdings (NYSE: NSM  ) fell as much as 10% today after missing estimates on earnings per share for its most recent quarter. This comes on the heels of reports that paint a picture of fierce competition in the mortgage-servicing industry for valuable mortgage-servicing portfolios.

So what: Nationstar's EPS, at $0.61, is significantly better than the $0.04 EPS loss in the year-ago quarter. Without one-time drags on the bottom line, Nationstar had $0.64 in adjusted EPS, still a penny below what analysts had expected. Revenue, at $277.2 million, was better than the consensus estimate of $268.9 million.

Nationstar has been in competition for several large mortgage-servicing portfolios, and it missed out on acquiring MetLife's (NYSE: MET  ) portfolio, which was sold to JPMorgan Chase (NYSE: JPM  ) yesterday. That hurt Nationstar, as did an earlier loss of Ally Financial's Residential Capital servicing business, which Ocwen Financial (NYSE: OCN  ) won after an intense bidding process.

Now what: Nationstar CEO Jay Bray remains confident that the company can achieve significant organic growth, and the tripling in revenue from the year-ago quarter attests to that possibility. However, Nationstar's loss of multiple large acquisition opportunities also points to threats on the horizon, as organic growth may run up against a wall of consolidation. The successful acquisition of a large mortgage-servicing portfolio may be the most important near-term action Nationstar can take to reverse its recent slide.

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Related Tickers

10/25/2016 10:04 AM
NSM $14.89 Up +0.01 +0.07%
Nationstar Mortgag… CAPS Rating: ***
JPM $68.86 Down -0.01 -0.01%
JPMorgan Chase CAPS Rating: ****
MET $46.61 Down -0.03 -0.06%
MetLife CAPS Rating: *****
OCN $4.04 Down -0.02 -0.49%
Ocwen Financial CAPS Rating: ***