Clayton Holdings Reports Strong First Year

| About: Clayton Holdings, (CLAY)

The company reported a excellent fourth-quarter results. CLAY came in with 24 cents per share in earnings, four cents ahead of the consensus estimate. This marked the third consecutive quarter in which the company posted a 20% positive earnings surprise. As a result, this year's earnings estimates have jumped 15 cents to $1.03 per share over the past month.

Clayton Holdings, Inc. (CLAY), through its subsidiaries, provides a suite of outsourced services, mortgage-related analytics, and specialized consulting services for buyers and sellers of, and investors in, mortgage-related loans and securities and other debt instruments.

Its services include transaction management services, which consist of due diligence, mortgage processing services for buyers of mortgage loans, professional staffing, and compliance products and services; credit risk management and surveillance services; and specialized loan servicing services.

The company reported a excellent fourth-quarter results. CLAY came in with 24 cents per share in earnings, four cents ahead of the consensus estimate. This marked the third consecutive quarter in which the company posted a 20% positive earnings surprise. As a result, this year's earnings estimates have jumped 15 cents to $1.03 per share over the past month.

"2006, our first year as a public company, ended on a strong note," said Frank Filipps, Chairman and Chief Executive Officer of Clayton. "For the quarter and the full year, Clayton registered significant growth in revenues and profits and improvement in margins; this in a year when total originations declined by 14% and MBS issuance declined by 4%. Driving this performance were our ongoing efforts to migrate due diligence business to our centralized underwriting platform, accompanied by tighter operational and expense controls. Our results also benefited from the excellent growth in our non-due diligence businesses - surveillance, conduit, staffing, special servicing and consulting - which registered year-over-year revenue growth of 55% and accounted for 45% of fourth quarter revenues."

Gross margin improved to 40.0% in the fourth quarter of 2006, as compared to 37.4% in the third quarter of 2006. This was the result of a positive shift in Clayton's mix of business, increased use of centralized underwriting services and improved productivity during the quarter. Cash flow from operations for the fourth quarter of 2006 was approximately $14.8 million as compared to approximately $1.4 million in the fourth quarter of 2005.

CLAY 1-yr chart:

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