PHH Corp. reported a net loss of $216 million for the fourth quarter and $254 million for all of 2008, but there was a silver lining to its year-end report.

The New Jersey-based company, which operates mortgage and vehicle fleet management businesses, said its mortgage production segment turned profitable in December and continued to make money in January. So PHH projects the business to be profitable for the entire first quarter.

"As those that have followed us closely know, the key to PHH has been getting the mortgage production segment to become a consistent profit generator," CEO Terence Edwards told analysts in a conference call.

Along with the rest of the industry, it's been a rough couple of years for PHH's mortgage banking businesses, which operate out of facilities in Mount Laurel, N.J., and Jacksonville. The company had agreed to a buyout in early 2007, but that fell apart in the financial market meltdown.

In its annual report, PHH said it has reduced employment in its mortgage businesses by 620 in 2007 and 2008 through job cuts and attrition, leaving it with 3,780 workers at the end of 2008. It does not break down employment between the New Jersey and Jacksonville offices, but the New Jersey office is much larger.

Although management indicated the mortgage business has turned the corner, one analyst remains cautious. Friedman, Billings, Ramsey analyst Paul Miller targets the stock price at $8 (it was trading at $9.62 before the earnings report), and that represents only the value of the fleet management business. He values the mortgage business at approximately zero.

"Given the continued stress in the housing market, the mortgage segment will continue to show volatile earnings. Should mortgage profitability increase and show more stability, we would revisit our valuation for the mortgage segment," Miller wrote in a research report two weeks ago after the earnings report.

Another analyst following the company, Bose George of Keefe, Bruyette & Woods, is more optimistic. He rates the stock as "outperform" and has a $20 price target.

One large investor thinks the stock is worth even more. In a filing with the Securities and Exchange Commission last week, Alan Fournier of Pennant Capital Management LLC in New Jersey said he thinks the stock is worth more than $40. Fournier, who has criticized management in the past, said in the filing that the "current depressed market valuation reflects a dim view of the issuer's stewardship by its board of directors."

Pennant, which owns 9.97 percent of PHH's shares, intends to nominate two directors of its own to the company's seven-member board at its annual meeting this year, the SEC filing said.