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Shares in Nationstar tumble on 3Q results, outlook

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November 8, 2013 06:25 PM EST | AP

LOS ANGELES (AP) — Shares of Nationstar Mortgage Holdings Inc. kept sliding Friday after the company's third-quarter profit disappointed and it cut its outlook through 2014.

THE SPARK: The company reported early on Thursday that its profit rose 49 percent to $81.9 million, or 91 cents per share, as income from servicing home loans increased. But analysts were expecting earnings of $1.27 per share for the July-September period.

Nationstar said fluctuations in interest rates hurt its refinance volumes and margins.

Nationstar also cut its earnings guidance for the year to $2.65 to $3.10 per share and to $4.50 to $6 per share for 2014. It had previously forecast ranges of $4.05 to $4.75 per share this year and $6.45 to $7.50 per share in 2014.

THE BACKGROUND: Nationstar, based in Lewisville, Texas, collects monthly payments on hundreds of billions of dollars of home loans. It buys the rights to service the mortgages from banks and other companies that made the loans. Nationstar also makes mortgages itself.

The company also said Thursday that it intends to sell its non-core wholesale lending operation and some retail operations to Stonegate Mortgage. The move is part of a push to cut costs and focus on making loans directly to consumers.

THE ANALYSIS: In a research note Friday, Sterne Agee analysts downgraded their rating on Nationstar's stock to "Neutral" from "Buy" and cut the price target on its shares to $45 from $60, citing planned changes with its lending operations.

SHARE ACTION: Down $4.27, or 10.5 percent, to $36.48 Friday. Shares also dropped 17 percent to $40.75 on Thursday. For the year, the stock remains up 18 percent.