Walter Investment Management Shares Dropped: What You Need to Know
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: Shares of asset manager and mortgage servicer Walter Investment Management (ASE: WAC) were getting hammered today, falling as much as 11% in intraday trading after the company announced third-quarter results.
So what: Investors could certainly find some highlights in Walter's earnings report. The company's business base grew, with 97,000 new accounts added during the quarter. The company also boasted the contribution that its acquisition of Green Tree has had through new fee-based servicing accounts. And excluding one-time charges -- including the big tax bill related to Walter no longer being a REIT -- the hefty GAAP loss doesn't look quite as bad.
However, for investors there's a significant amount of uncertainty around Walter's future. Management wants to transform and grow the business, and took a big step toward that by acquiring Green Tree, but investors will have to wait to see if the strategy pans out.
Now what: As noted above, "uncertainty" is the key word here, and that holds true for the expected 2012 results. In the earnings report, management projected total EBITDA for 2011 will likely be between $200 million and $210 million. And what of next year? Well, the company expects that legacy business and the accounts added in 2011 will contribute the same $200 million to $210 million in EBITDA, but as far as the contribution of new business, management left it at saying it "will be dependent on a variety of factors, including but not limited to the amount, timing, product type and delinquency rates of the new business added."
In other words, investors will have to wait and see. For right now, they don't seem to be hot on that forecast.
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