Why Ocwen Financial, Westar Energy, and United Rentals Slumped Today
Thursday was a positive day for the stock market, and major benchmarks rose almost 1% on enthusiasm about the state of the U.S. economy and the generally favorable tenor of earnings season. Claims for unemployment benefits remained at extremely low levels, and investors found new hope that stalled efforts in the federal government on reforms from healthcare to tax policy might gain positive momentum in the near future.
Yet even on a good day, some stocks couldn't keep up, and Ocwen Financial (NYSE: OCN), Westar Energy (NYSE: WR), and United Rentals (NYSE: URI) were among the worst performers. Below, we'll look more closely at these stocks to tell you why they did so poorly.
Ocwen plunges on new CFPB allegations
Shares of Ocwen Financial lost more than half their value after the Consumer Financial Protection Bureau said that it had sued the mortgage servicing company. The CFPB alleged that Ocwen made "widespread errors, shortcuts, and runarounds" that cost borrowers money, and in some cases, their homes. Among the specific contentions were that Ocwen illegally foreclosed on struggling borrowers while ignoring customer complaints, failed to credit customer accounts for payments that borrowers made, and sold off servicing rights to mortgage loans without full disclosure of its actions. The attorney general of the state of Florida also took similar action, and Florida-based Ocwen now faces a new battle for its survival. Ocwen had made progress in working with regulators in the recent past, but today's action is a huge setback that has many shareholders feeling more skeptical about Ocwen's future than ever before.
Image source: Ocwen Financial.
Westar Energy gets rejected
Westar Energy stock declined 8% after regulators at the Kansas Corporation Commissions blocked the sale of Westar to Great Plains Energy (NYSE: GXP). The $12.2 billion merger would have joined utilities in Kansas and Missouri. Great Plains had argued that the combination would produce nearly $2 billion in efficiency gains in the next 10 years, but regulators instead sided with those who had argued that the deal was too rich and would have required rate increases sooner rather than later. Great Plains stock was hardly affected at all by the decision, leading many to conclude that Westar had a lot more to lose from the deal falling through then Great Plains had to gain from a successful merger.
United Rentals falls despite solid results
Finally, shares of United Rentals finished the day down 5%. The rental equipment specialist announced its first-quarter results late Wednesday, reporting a 3% rise in revenue on gains in rental activity and time utilization. The specialty trench, power, and pump segment saw particularly large sales gains of almost 17%, and more broadly, United Rentals was excited about its future, boosting its outlook for full-year sales, operating cash flow, and free cash flow. Yet shareholders focused on a drop in rental rates during the quarter, ignoring better-than-expected levels of profit and revenue. If United Rentals can see improving conditions in the industrial economy, then fundamental growth could help it support even better results going forward.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Ocwen Financial. The Motley Fool has a disclosure policy.