Compass Point Believes "Normalized" is Still Two Years Out for PHH Corporation

In a report published Thursday, Compass Point analyst Kevin Barker reiterated a Neutral rating and $23.00 price target on

. In the report, Compass Point noted, "PHH managed to put up a decent operating result as the company kicked off its re-engineering and growth initiatives. The net loss reported this quarter was better than expected given that expense levels remained under control while loan servicing fee income benefitted from a larger portfolio and muted amortization expense. The GAAP result was significantly better than our expectations primarily due to a huge derivative gain related to the MSR combined with a less than expected decline in the fair value of the MSR from "non-market-related" adjustments. Despite these positive developments, we still expect PHH to record a significant GAAP loss in 2015 with TBV eroding to roughly $25 per share in the back half of the year (up slightly from our $24 estimate). We expect this dynamic, combined with uncertainty surrounding PHH's ability to drive a mid-teens ROE over the long-term, will cause the stock to continue trading below TBV despite a very strong balance sheet. Considering the uncertainty surrounding the future of the company, we would wait for a better entry point to buy the stock. We would be buyers if the stock traded down to $21-22 given this is a level at which the company could prevent TBV from eroding through stock buybacks." PHH Corporation closed on Wednesday at $24.46.