PHH Corp. said yesterday that profits rose 8.8 percent in its third quarter despite a dip in its mortgage business.
The Hunt Valley-based service company said two of its three main businesses -- its management of fleets of vehicles for corporations and executive relocation division -- are growing.
But its third division, a mortgage business, has suffered a decline in revenues and profits because of climbing interest rates.
Chief Financial Officer Roy Meierhenry said yesterday that he expects continued improvements in PHH's vehicle management and executive relocation businesses, as well as sales of mortgages, to push profits higher in the coming months.
"We expect our earnings to be in line with our expectations of 10 to 15 percent growth," he said.
The company said earnings grew to $16.8 million on sales of $494.1 million in its quarter that ended Jan. 31, compared with earnings of $15.4 million on revenues of $516.8 million in the same period a year ago.
Contributing to the earnings was the sale of $1.2 billion worth of the company's mortgages. PHH gained about $6 million on the sale, he said.
Mr. Meierhenry said PHH probably will continue to sell mortgages in the coming months. But he said the company expects to stop selling mortgages when interest rates stabilize, which he expects soon.
The company has sold most of its adjustable rate mortgages and would like to increase the number of fixed-rate mortgages it holds, he said.
The rest of the mortgage business, which currently holds about $17 billion worth of home loans, broke even as profits from servicing loans covered losses suffered by the division that brings in new borrowers, Mr. Meierhenry said.
Profits from PHH's executive relocation services have risen because the company is increasingly charging fees for services instead of relying on profits from, say, the resale of an executive's house.
PHH's shares fell 50 cents to close at $37.50 after the announcement yesterday.
Linell McCurry, who follows PHH for Rutherford, Brown and Catherwood, a Philadelphia-based stock brokerage, said the earnings report was a slight disappointment.
Most analysts were expecting the company to report profits of a dollar a share instead of 98 cents, she said.
PHH's stock hasn't done very well in the last year or so because many investors are afraid that higher interest rates will hurt the company's finances, she said.
And some may be concerned that some of PHH's profits are a result of sales of its assets -- its mortgages -- rather than ongoing business.
PHH Corp.
Hunt Valley ... ... ... ... ... ... ... Ticker ... ... ... Yesterday's
... ... ... ... ... ... ... ... ... ... Symbol ... ... Cls. ... ... Chg.
... ... ... ... ... ... ... ... ... ... PHH ... ... .. 37 1/2 .. .. - 1/2 Period ended
1/31/95 ... ... ... ... ... 3rd qtr. ... ... ... ... Year ago ... ... Chg.
Revenue ... ... ... ... ... $494,141 ... ... ... ... $516,809 .. ... -4.4%
Net Income ... ... .. .. .. $16,762 ... ... .. .. .. $15,411 .. .. .. +8.8%
Primary EPS ... .. .. .. .. $0.98 ... ... ... .. ... $0.87 ... ... .. +12.6%
... ... ... ... .. .. .. .. 9 mos. ... ... ... .. .. Year ago ... ... Chg.
Revenue ... ... ... ... ... $1,524,586 ... .. .. ... $1,600,753 .. .. -4.8%
Net Income ... ... .. .. .. $50,889 ... ... .. .. .. $46,403 ... .. .. +9.7%
Primary EPS ... ... ... ... $2.94 ... ... ... ... .. $2.61 ... ... ... +12.6%
Figures in thousands (except per share data.)