PHH Corp. earnings set record

November 22, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Buoyed by a continuing shift to fee-based income, PHH Corp. yesterday reported record earnings for the second quarter.

The Hunt Valley-based company said earnings were $17.6 million, or $1.01 a share, for the period ended Oct. 31. Likewise, earnings for the six-month period hit a new high of $34.1 million, or $1.96 a share.

"We are very pleased that our strategy continues to pay off," said Roy A. Meierhenry, senior vice president and chief financial officer.

The company also is expanding its market to smaller companies and affinity groups -- such as trade groups and employee organizations, he said. The company's stock reacted by rising 37.5 cents, to close at $35.875 a share. The company also declared a quarterly dividend of 32 cents a share, the same amount as the previous quarter.

PHH, which provides a variety of services to corporate customers worldwide, saw operating profits in its vehicle fleet managing division increase by 15 percent in the quarter to $11.3 million. Operating earnings in its employee relocation and real estate service also soared by 75 percent to $11.1 million.

However, the company's mortgage banking service was hammered by rising interest rates that cut the making of new mortgages by 60 percent, reducing the division's operating income by 36 percent, to $7.5 million.

But the previous second quarter had seen unusually high mortgage earnings because of the rush to refinance, said Alex C. Hart, an analyst for Ferris, Baker Watts Inc., a Baltimore investment banking firm.

"This is kind of getting back to normal," he said, explaining the drop.

Mr. Hart said the results were fueled by the company's shift from asset-based revenues -- where the company buys and sells such items as houses and cars for clients -- to fee-based revenues in which the company provides services instead.

"I think the quarter looked good. Overall they were a few pennies ahead of my estimate [of 97 cents]," he said.

Because of the shift to more fee income, which has a higher profit margin than asset-based revenues, profits increased as sales in the quarter dropped by 6.5 percent to $510.1 million. Sales for the six months dropped by 4.9 percent to $1 billion.

The shift to more fee income was evident in the company vehicle management division, accounting for 47 percent of revenues, compared with 41 percent a year ago, according to Linell McCurry, director of research for Rutherford, Brown & Catherwood Inc., a stock brokerage firm in Philadelphia. "They've shown nice increases in the fee income that they are generating in both the relocation and vehicle management, which has been part of management's long-term strategy," she said.

PHH Corp.

Hunt Valley

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

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

.. .. .. .. .. .. .. .PHH .. .. ...35 7/8 .. .. .. .. .+ 3/8

Period ended

Oct. 31 .. .. .. ...2nd qtr. .. ...Year ago .. .Chg.

Revenue .. .. .. ..$510,137 .. .. .$545,374 ...-6.5%

Net Income .. .. ...$17,612 .. .. ..$16,203 ...+8.7%

Primary EPS .. .. .. .$1.01 .. .. .. .$0.90 ..+12.2%

.. .. .. .. .. .. ...6 mos. .. .. .Year ago .. .Chg.

Revenue .. .. .. ..$1,030,445 .. .$1,083,944 ..-4.9%

Net Income .. .. ... .$34,127 .. .. .$30,992 .+10.1%

Primary EPS .. .. .. ...$1.96 .. .. ...$1.74 .+12.6%

Figures in thousands (except per share data.)

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