What happened
Black Knight (BKI) struggled in February as its share price fell 24.7%, according to S&P Global Market Intelligence.
The stock's performance was off the pace of the S&P 500, which was down 3.2% in February. Black Knight is down about 27% year to date while the S&P 500 is down about 10% year to date as of March 7.
Image source: Getty Images.
So what
Black Knight provides mortgage servicing software, as well as data and analytics, for mortgage lenders. The software solutions business accounts for about 85% of revenue while the data and analytics arm accounts for roughly 15% of revenue.
With its software solutions business, Black Knight provides the technology that allows mortgage lenders and servicers to automate the back-end processes through the life of the mortgage. It is the market leader in this particular niche, with a 63% market share, up from 61% at the end of 2020.
Most of the decline in the month occurred after earnings were released on Feb. 15. The price went from $68 per share on Feb. 15 to a low of $53 share on Feb. 23, a 22% drop. It likely wasn't related to fourth-quarter earnings results as the company beat estimates and had revenue and earnings increases. Year over year, revenue was up 13% to $386 million, operating income was up 32% to $83 million, and earnings per share was up 30% to $0.39.
Rather, the market may have reacted to the news released on Feb. 15 of an executive transition, as Anthony Jabbour, CEO since 2018 and chairman and CEO since 2021, was replaced as CEO by current president Joe Nackashi. Nackashi has been with the company for 35 years and has been president since 2017. Jabbour will assume the role of executive chairman of the board. CFO Kirk Larsen will now be president and CFO.
Now what
Since Feb. 23, the stock has gained back some of its losses and is currently trading at around $59 per share. On the fourth-quarter earnings call, Larsen said the company expects revenue to increase 8% to 9% in 2022 and adjusted earnings per share to be up 10% to 15% for the year.
While lower mortgage originations are expected this year overall, the company could benefit if lenders bring servicing in-house and use their platform. Black Knight also expects higher foreclosure volumes, which could provide $30 million tailwind, as Larsen said, as potentially more customers use their platform to conduct the foreclosures.
