PHH Corporation's (NYSE:PHH) Operational Fundamentals Remain Intact

PHH Corporation's (NYSE:PHH) fundamental operations appear to be intact, says FBR, and they believe write-up in mortgage servicing rights will be driven significantly higher by higher interest rates.

FBR said, "We believe that the fundamental operations at PHH remain intact, and we expect higher interest rates to drive a significant write-up in mortgage servicing rights (MSR)...In addition, we are revising our 4Q10 GAAP EPS estimate to $2.14 from $0.52, but we are maintaining our 4Q10E operating EPS of $0.52. Our operating earnings estimate indicates that PHH will earn an 11.1% operating TROE in FY10, following 9.6% in FY09, 0.0% in FY08, and –0.9% in FY07. If the company can successfully implement its cost saves and there is at least a subpar economic recovery, we believe PHH can achieve a long-term TROE run-rate close to 13%."

FBR Capital maintains an "Outperform" rating on PHH Corporation, which closed Friday at $24.60, up $0.40, or 1.65 percent. FBR raised their price target on them from $26 to $28.