PHH shareholders may get increase in dividends in '94 Earnings jump 17% in first quarter

August 24, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

PHH Corp. reported a 17 percent jump in first-quarter earnings yesterday, prompting Chairman and Chief Executive Robert D. Kunisch to say shareholders may receive an increase in dividends next year.

If business remained strong and the economy continued to grow, "we will probably look at a dividend increase in the fourth quarter," Mr. Kunisch said, following the company's annual meeting.

PHH, based in Hunt Valley and providing various business services to corporate clients, including vehicle management, relocation and real estate management, has left the annual dividend at $1.20 a share for three years.

Mr. Kunisch said the company aimed at holding the shareholder payout to between 30 percent and 35 percent of per-share earnings. During the fiscal year that ended in April, PHH earned $3.25 a share.

Most analysts who follow the company are estimating net incomein the range of $3.50 to $3.65 a share this year. With a little help from an improving economy, the PHH executive said he believed the company could exceed those levels.

Referring to the quarter just ended, Ira H. Malis, an analyst who follows PHH for Alex. Brown & Sons Inc., said the company's earnings were a little better than Wall Street had been expecting.

During the first quarter, which Mr. Kunisch characterized "as normally the company's toughest," PHH reported net income of $14.8 million, up from $12.6 million in the same period last year. Revenues rose 5 percent to $538.6 million.

In an overview of the company's operating segments, Mr. Kunisch said the mortgage banking division posted a 91 percent increase in loan closings in the first quarter over the same period last year as the servicing portfolio surpassed $12.5 billion, up from $8.5 billion a year ago. The unit originates and services first mortgages to consumers through its relationship with companies, affinity groups, government agencies, credit unions and mortgage banks.

Kevin R. O'Brien, another analyst with Alex. Brown, said that during a conference call with analysts later in the day, PHH said its mortgage banking unit posted a 63 percent gain in operating income and accounted for the bulk of the company's first-quarter growth.

Looking at the worldwide vehicle management business, Mr. Kunisch said gains from fuel and other fee-based services were offset by declines in vehicle purchases as corporate clients continued to reduce their fleets.

Commenting on relocation and real estate services, Mr. Kunisch said: "On a global basis, authorizations to purchase homes and homes sold were down slightly. This was somewhat offset by increase in the value of homes sold in the U.S. and a decrease in the amount of time taken to sell homes on behalf of our clients."

Looking into the future, Mr. Kunisch said the company would like to bring more of the services it currently offers to corporate clients and members of affinity groups directly to consumers.

He said this was still four, or more, years off and it could include mortgages, and vehicle services, such as leasing, emergency road service and maintenance assistance.

Another long-term project is the addition of a fourth leg to the company to lessen its dependence on the real estate market and the financial success of corporations it serves. He said the move might be five to 10 years off and did not say what lines of business PHH was considering.

Also at yesterday's meeting, shareholders approved the company's slate of five directors, including the new appointment of Donald J. Shepard to the board as a successor of Harry K. Wells, the retired chairman of McCormick & Co. Inc., who had on the board since 1975.

Mr. Shepard, 46, is chairman of AEGON USA Inc., a Baltimore-based insurance subsidiary of a Dutch insurer.

.. .. .. .. .. .. .. .. Ticker .. .. .. .. .. ..Yesterday's ..

.. .. .. .. .. .. .. .. Symbol.. .. .. .. Cls... .. .. .. ..Chg.

.. .. .. .. .. .. .. .. PHH .. .. .. .. ..41 3/4 .. .. .. .. .. + 3/8

Period ended

July 31 .. .. .. .. .. 1st qtr.. .. .. .. Year ago .. .. .. Chg.

Revenue .. .. .. .. .. $538,570 .. .. .. ..$513,266 .. .. .. +4.9%

Net Income .. .. .. .. $14,789 .. .. .. .. $12,639 .. . .. ..+17.0%

Primary EPS .. .. .. ..$0.84 .. .. .. .. .. $0.74 .. .. .. ..+13.5%

Figures in thousands (except per share data.)

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