Stocks to Short #2: PHH Corp. (PHH)
PHH Corp. (PHH) provides both mortgage servicing and originates mortgages, though it also handles vehicle fleet services. PHH is struggling with lower total loan margins and refinancing declines.
This is not a space to be in right now, because the housing market is being buoyed by speculators rather than organic demand.
Analysts revised earnings downward substantially, from a $2.53 average to $1.58 per share. Meanwhile, PHH stock earnings have missed estimates each of the past four quarters and by large amounts. I’m not crazy about the balance sheet, with $2.5 billion in cash and long-term investments offset by $5.8 billion in debt. Cash flow has been highly problematic, too. FCF was negative to the tune of $3.16 billion in FY10, jumped to $1 billion in FY11, but then fell to $320 million in FY12.
PHH stock also should be shorted, or at least sold if you hold it.