PHH Corp. reported a 12 percent increase in first-quarter earnings yesterday -- the company's 11th consecutive quarterly gain -- and the chairman predicted similar growth for the remainder of the decade.
But the stock market seemed to care less. PHH shares closed at $36.875, up only 12.5 cents in New York Stock Exchange trading.
"I would have expected a little more favorable reception to these numbers," Alex Hart, an analyst who follows PHH for Ferris Baker Watts, said after the company reported a first-quarter net income of $16.5 million, up from $14.8 million in the same period last year.
"This is a case where a company delivers, delivers and delivers and the market just sits there," Mr. Hart said.
PHH's stock price has been relatively flat in recent months, trading in the mid-to-upper 30s, down from its 12-month high of $46.75 last November.
Following his annual meeting yesterday with shareholders at the company's headquarters in Hunt Valley, Robert D. Kunisch, chairman and chief executive of PHH, acknowledged that the company's stock does not reflect its performance and he took part of the blame.
The chairman said PHH "is not easy to understand" and it needs "do a better job of getting our story out."
Mr. Kunisch said PHH seems to suffer from an identity crisis. "We're not a household name," he said, noting that some analysts have lumped PHH into the financial services business.
The company's businesses include vehicle management, mortgage banking, corporate relocation and real estate.
Mr. Hart agreed that PHH is not easily classified, unlike many Fortune 500 companies, and said there is some confusion among market analysts over who should be following the company.
"It is a difficult company to get your hands around and understand each of its lines of business and what make it tick," Mr. Hart conceded.
hopes of changing that, PHH has begun holding conference calls with about 30 analysts after reporting quarterly results.
PHH's chairman told shareholders that he expects gains in earnings to be "on the high side of the 10 to 15 percent" range through the 1990s.
To help achieve that, Mr. Kunisch said, the company will seek sell its services to more affinity groups, such as the American Association of Retired Persons or the Pentagon Federal Credit Union.
He said there are 100,000 such groups -- with millions of members -- and PHH now serves only about 15.
Mr. Kunisch also said he anticipates the company expanding internationally, primarily in Germany and France in the near future, followed by increased activity in the Far East near the end of the decade.
Reporting on first-quarter results, Mr. Kunisch said the mortgage banking unit's operating income declined 32 percent to $12.7 million.
"As anticipated," the chairman said, "rising interest rates caused the mortgage banking industry to experience decreases in originations and closing activity."
Mr. Kunisch said operating income of the relocation and real estate services business increased 86 percent, to $6.9 million, and operating income of the vehicle management business was up 48 percent, to $12.6 million.
Hunt Valley ... ... ... ... Ticker ... ... Yesterday's
... ... ... ... ... ... ... Symbol ... ... Cls. ... Chg.
... ... ... ... ... ... ... PHH ... .. ... 36 7/8 .. .. +
7/31/94 ... ... ... 1st qtr. ... ... Year ago ... ... Chg.
Revenue ... ... ... $515,533 ... ... $538,570 ... ... -4.3%
Net Income ... ... $16,515 ... ... .. $14,789 ... ... +11.7%
Primary EPS ... ... $0.95 ... ... .. $0.84 ... ... ... +13.1%
Figures in thousands (except per share data.)