(By Balachander) Home Loan Servicing Solutions Ltd. (NASDAQ: HLSS) shares were upgraded to "buy" from "hold" by Deutsche Bank, given the dividend increase and expectation of stable ROEs.
The bank, which has a price target of $19.25 on the stock, believes the recent pullback, caused by high yield stocks coming under pressure, has created an attractive buying opportunity for HLSS.
The company is engaged in acquiring mortgage servicing assets, primarily subprime and Alt-A mortgage servicing rights and associated servicing advances.
HLSS declared a monthly div of 12c for Nov and Dec, which is 1c increase from Oct. The increase occurred two months earlier than DB expected, the bank said.
[Related -Deutsche Bank Starts Home Loan Servicing Solutions (HLSS) As 'Hold', $14 PT]
While prepayment rates have increased from 3Q levels, DB said, the increase through the month of October was lower than management's expectations.
Given slower than expected Oct CPRs and management's updated 4Q guidance, DB increased its 4Q EPS estimate to 40c from 38c.
The stock, which has been trading in a 52-week range of $12.80 to $20.24, jumped 6.96 percent to trade at $18.90 on Friday.