Shares of Countrywide Financial Corp. gave back some of Friday's gains in afternoon trading, as some analysts said they are wary of the lender's forecast for a profit next year.
The Calabasas, Calif.-based home lender on Friday reported a $1.2 billion loss for the third quarter. The "unprecedented disruption" of the mortgage markets, dragged by sinking home prices, knocked value out of the company's book of mortgage debt and forced higher credit costs.
However, Countrywide forecast a profit for the fourth quarter and 2008, which Stifel Nicolaus analyst Chris Brendler called a "significant surprise." Not only did Brendler expect more losses, he thought industry conditions were in too much upheaval for Countrywide to proffer a prediction.
Countrywide's stock surged 32 percent to close Friday at $17.30, recovering after a two-week plunge saw the shares hit their lowest point since 2002 in response to banks and lenders reporting steep credit costs. However the stock, which as recently as January had eclipsed $45, was backsliding again on Monday, falling 70 cents, or 4.1 percent, to $16.60.
Friedman Billings Ramsey analyst Paul Miller Jr. wrote in a client note that any forecast for the mortgage industry next year is a guess. With home prices slumping, "it is hard for us to believe that anyone can accurately predict credit losses for any mortgage-related company, especially Countrywide Financial," he said.
He called Countrywide's outlook for 10 percent to 15 percent return on equity "unrealistic."
Bruce Harting, an analyst with Lehman Brothers, said investors "should be extremely cautious about forecasting results next year."
