For Immediate Release
Chicago, IL – June 9, 2010 – Zacks.com Analyst Blog features: Priceline.com (PCLN), Expedia Inc. (EXPE), Orbitz Worldwide (OWW), Bank of America Corp. (BAC) and Citigroup (C).
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Here are highlights from Tuesday’s Analyst Blog:
Online Travel Cos See the Light
The past year has been challenging for online travel companies, such as Priceline.com (PCLN), Expedia Inc. (EXPE), Orbitz Worldwide (OWW) and Travelocity.
On one hand, the recession impacted consumer purchasing power (both individual and corporate), which indirectly hurt the companies' business. On the other hand, local municipalities in the U.S. have been at their throats, trying to earn additional revenue in the form of occupancy tax.
Occupancy tax matters have gone to court a number of times, with some cases decided in favor of the online travel companies and some decided against. Both Priceline and Expedia have been called upon to pay occupancy tax pursuant to adverse rulings.
While the situation did look extremely bleak for online travel companies, at present it appears that their voices have been heard.
Just recently, courts in Philadelphia and Chicago have decided that occupancy tax claims by municipalities could not be made without due evidence of misdemeanor. The judges are increasingly of the opinion that original occupancy tax collection did not come under the purview of the judicial system. It was felt that only in the event of online travel, the companies failing to pay the occupancy tax adjudged by the tax authorities, could the case go to court.
Since none of the online travel companies have failed to make such payments, they should not be penalized. The task before the municipalities is to change the local tax laws in order to make the payment of occupancy tax compulsory for online travel companies.
BofA to Resolve Countrywide Charges
The Federal Trade Commission (FTC) said on Monday that Bank of America Corp. (BAC) will pay $108 million to settle federal charges against its acquired mortgage lender Countrywide Financial Corp. for collecting excessive fees from about 200,000 distressed homeowners.
Countrywide Financial Corp. collected excessive fee before it was acquired by BofA in July 2008. The settlement amount, which is one of the largest in FTC’s history, will be used to reimburse overcharged borrowers.
According to the FTC chairman Jon Leibowitz, during the boom period, Countrywide significantly gained from making risky loans to homeowners. Again, during the economic downturn the company profited from loan defaults.
Countrywide swindled homeowners who were behind on their mortgages payments and charged thousands of dollars as fees. These fees were far higher than market rates. The fees inflated after Countrywide created subsidiaries to hire vendors to supply the services.
The settlement of federal charges can be viewed as one of the strategies of BofA to keep itself away from the housing trouble. BofA did not admit to any transgression for the charges. BofA also wanted to avoid the expense and distraction associated with the case.
BofA’s first-quarter 2010 earnings came in at 28 cents per share, substantially ahead of the Zacks Consensus Estimate of 9 cents. However, this compares unfavorably with the earnings of 44 cents in the prior-year quarter.
Strong capital markets activity and lower provision for credit losses were the primary factors that helped BofA bounce back to profitability after incurring significant losses for the last couple of quarters.
The market turmoil was more harmful for BofA than its peers except Citigroup (C). However, BofA concluded its biggest acquisitions in this period. Following Countrywide, the company acquired Merrill Lynch almost during the height of the financial crisis last year.
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