HomeStreet Cost Cuts Should Result In Higher 2019 Earnings, Analyst Says In Upgrade

A tough mortgage banking environment will likely lead to cost savings initiatives from HomeStreet Inc (NASDAQ: HMST), which should result in an improved 2019 earnings outlook, according to B. Riley FBR.

The Analyst

Steve Moss of B. Riley FBR upgraded HomeStreet shares from Neutral to Buy and raised the stock’s price target from $30 to $35.

The Thesis

HomeStreet is likely to launch initiatives to enhance efficiency in its mortgage operations, including a cost savings plan, which will result in an upward bias to 2019 EPS estimates, Moss said in a Monday note.

The company announced a $12.4-million cost savings plan that represents 3 percent of its expense base, and said it would continue to explore opportunities for further cost cuts in its mortgage unit, the analyst said.

“An improvement in the profitability of HMST's mortgage operations is likely to have a material impact to EPS and should bode well for HMST's longer-term EPS outlook." 

Moss estimates that if the company were to reduce mortgage banking expenses by 10 percent, 2019 EPS estimates could be revised upward to by 35 cents to 75 cents per share.

Price Action

HomeStreet shares were trading up 4.46 percent at the time of publication Monday afternoon. 

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