Piper Jaffray analyst Kevin Barker has upgraded Nationstar Mortgage Holdings Inc. to "neutral" from "underweight," writing that the company's shares are fairly priced near tangible book value.
Barker sees lower interest expense and lower taxes as near-term positive catalysts for Nationstar Mortgage. He expects the company to continue delevering by paying down corporate debt over the past two years and to enjoy EPS accretion should corporate tax rates drop to 20% and state taxes become nondeductible.
Regarding the potential sale of Nationstar Mortgage, Barker said he does not expect a bank to be a potential acquirer given the amount of mortgage servicing rights that the company holds. He believes that the company is most likely to enter into an agreement with a nonbank entity as such scenario would have limited potential for cutting funding costs and generating costs savings. Barker believes that Nationstar Mortgage could be worth $15 to $21 per share in a takeout scenario.
Barker raised his price target to $16.50 from $15.50. He also adjusted his 2018 EPS estimates for the company to $1.64 from $1.46 and introduced 2019 EPS estimate of $1.80.