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CoreLogic explains Landsafe purchase at respectable Q3 results

CoreLogic's share price closed at $38.63 on Friday
  • CoreLogic's purchase of Landsafe from Bank of America may lead to more expansion in the property valuation area.
  • CoreLogic's revenues were up 5 percent to $386.4 million in the third quarter (Q3)with growth in property, insurance, international and underwriting solutions.
  • The launch of CoreLogic's property valuation solutions group will provide leadership for all of the company's valuation-related products and solutions.

CoreLogic, the global property information, analytics and data-enabled services provider, gave more details about the launch of its expanded data-driven property valuation solutions group at its third quarter (Q3) results announced Wednesday.

Revenues

Third-quarter revenues totaled $386.4 million compared with $367.5 million in the same 2014 period and $386 million in the second quarter of 2015.

CoreLogic’s revenues were up 5 percent to $386.4 million with growth in property, insurance, international and underwriting solutions. Net income from continuing operations of $28.3 million was down 43 percent, reflecting lower operating income and higher provisions for taxes.

During Q3, the company repurchased approximately one million of its common shares for $38.7 million.

Future growth

CoreLogic, which provides MLS listing technology to clients across the U.S., including Zillow and Redfin, is positioning itself for further growth.

“As we move forward, we believe we are well positioned to capture growth opportunities in the areas of property intelligence, underwriting and risk management,” said CoreLogic CEO and President, Anand Nallathanbi.

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CoreLogic’s purchase of LandSafe Appraisal Services from Bank of America on September 30, 2015, for $122 million is driven by the company’s desire to expand more in the area of property valuation, said Nallathanbi.

“The addition of LandSafe allows us to provide expanded value to one of our largest clients and at the same time increases our scale and ability to provide the market with differentiated valuation solutions,” said Nallathambi.

Property valuation

Speaking on Thursday, he touched on the company’s recent expansion into property valuation.

“We are excited about the launch of our property valuation solutions group which will provide leadership for all of our valuation-related products and solutions.

“We believe we possess unique data, analytics and data enabled services that collectively will provide more accurate estimates of property values and data driven insights into important factors that may influence those values now and in the future.”

Answering a question from Stephens’ Inc. analyst John Campbell about the LandSafe purchase, the CEO said: “We are a major player in property valuation through our analytics, through our data and we’re in the appraisal management area already. So this scales up.

“One of our big success is we focus on core solutions area and we scale them up. So this is very much a similar type effort on our part.”

He added, “The LandSafe deal at this point is focused primarily on Bank of America, but over time we may choose to use this platform to expand to other clients.”

Valuation market share — now and in the future

Asked about CoreLogic’s market share in valuation and where he saw that heading over time, Nallathambi said:

“At the moment, if you include the appraisal area, it’s still very fragmented — it’s a big market. You’re talking about $3 billion or $4 billion on the appraisal side alone. So it’s a big market with a lot of players. We would be a significant player with the acquisition of LandSafe and our current activities, we would be a significant player already.

“And then when you throw in our Automated Valuation Models (AVMs), Loan Safe Appraisal Management (LSAM) products and some of our other data related assets, we would become a very significant player with a lot of future growth opportunities.”

It’s a significant “pain point” for the industry, he said.

“Everybody wants data validation, everybody wants improved cycle time and quality, and we think we can bring a lot of those benefits to the market and that’s really what we are focused on.”

‘Underperform’ note

Kevin McVeigh, managing director and head of US Financials at Macquarie Capital, said today he had not changed his underperform note on the CoreLogic.

“I think they are in a tough spot. They’ve benefited a lot from the refinancing market but as that starts to peak or move off a bit it will be tough to enjoy further (growth).”

In his note, he added: “The Mortgage Bankers Association (MBA) currently forecasts origination volumes to be down 9 percent in 2016 and we believe there could be a downside risk to these estimates if or as rates move higher. We remain our status of ‘Underperform’ given our belief that purchase growth will not offset refinancing weakness on rising rates.”

Purchase-driven cycle

CoreLogic said the U.S. mortgage market was continuing to transition to a purchase-driven cycle.

“With the market fundamentals improving, the recent pick-up in purchase volumes should help offset the expected tapering of refinancing activities,” stated the company. “Also, sustainable job creation and overall economic recovery should support healthier housing starts and inventory levels over time. Overall, we believe this transition has set the stage for a more sustainable real estate market.”

Chief Operating and Financial Officer, Frank Martell, added: “We still believe we are the scaled player in property information and data in the industry. And I think our client roster demonstrates that. We supply data to over 500 lenders across the North American landscape. So we are still the skilled player in data analytics and I think competition will ebb and flow.”

CoreLogic’s share price closed at $38.63 on Friday, up slightly up for the week.

Email Gill South.