Lender Processing Services, Inc. (LPS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:

Lender Processing reported modest third quarter 2013 results as earnings and revenues decreased year over year. Lender Processing's technology-driven end-to-end solutions for the mortgage and real estate industries as well as contract renewals are likely to aid in generating decent business growth and position it to capitalize on market recovery. However, continued underperformance in Default Services and sustained macroeconomic uncertainty refrain us from being bullish on the stock. Additionally, the company's business model is highly sensitive to government regulation, political risk and litigation issues which remain headwinds in future. As such, we are changing our long-term recommendation for the stock from Neutral to Underperform as we expect it to perform well below the broader market.

Overview:

Headquartered in Jacksonville, Florida, Lender Processing Services Inc. provides integrated technology and outsourced services to the mortgage lending industry. The company's products and services span the entire life cycle of a mortgage, from origination to servicing, to foreclosure.

As a result of mortgage losses and an increase in title insurance claims, Fidelity National Services (FIS) announced the spin off of its unit Lender Processing Services in February 2008. The spin off took place on July 2, 2008 and the shares of the company began trading on the New York Stock Exchange under the ticker symbol "LPS" on July 3, 2008.

The company conducts its operations through two reporting segments the Technology, Data and Analytics segment, and the Loan Transaction Services segment.

The Technology, Data and Analytics (TD&A) segment includes the company's mortgage processing services, business process software, alternative property valuations business, property records business and mortgage origination software. These products and services encompass the entire life cycle of the mortgage business, but primarily focus on the period after a mortgage has been created.

The Loan Transaction Services (LTS) segment comprises loan facilitation services business (which targets the production of a mortgage loan) and the default management services business (which targets the management of mortgage loans that go into default). Within the loan facilitation services business, the company provides settlement services (title agency services, closing services, and lien recording services), appraisal services and various other origination services, including property information and real estate tax services. Within the default management services business, the company provides foreclosure services, property inspection and preservation services, and asset disposition services.

In February 2009, Lender Processing completed the sale of all of its interest in Investment Property Exchange Services Inc. (IPEX) to Fidelity National Financial (FNF) in exchange for the remaining 61% of the equity interests of Fidelity National Real Estate Solutions Inc. (FNRES). The exchange resulted in FNRES becoming a wholly-owned subsidiary of the company.

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