Delta Funding Corp. said Tuesday that it would meet analysts' earnings expectations for the fourth quarter and that its cash flow was positive during the period.

Home equity lenders like Delta have been struggling to generate up-front cash after their previous accounting methods resulted in unpredictable earnings.

The announcement sent the company's stock up 75 cents on Tuesday, to close at $7.125.

Delta was trading at $7.6875 at midday Wednesday.

According to First Call, analysts expect Delta to report earnings of 28 cents a share for the fourth quarter of 1998.

This is up from the third quarter's 20 cents but down significantly from a year earlier, when the company earned 54 cents a share.

Hugh Miller, chief executive of Woodbury, N.Y.-based Delta, said its "conservative" approach to the business was responsible for the positive results.

"We are extremely pleased with the way we are emerging from the fixed- income-market turmoil," Mr. Miller said.

Home equity lenders have struggled in the past year as investors lost faith in the sector and profits from loan securitizations dried up. Several were forced to restructure, sell, or close their doors.

Industry analysts and executives have predicted that stock of companies surviving the downturn would rebound in this quarter.

Shares of Amresco Inc., Dallas, also rose this month as investors speculated that it would be bought and Prudential Securities predicted internal growth.

Delta said it has about $750 million of warehouse lines. In early December it securitized $400 million of loans.

Investor demand for the securities was strong, the company said.

Loan prepayments are still slowing down, Delta said.

It also noted that it uses cash-in accounting, a method favored in recent proposals by the Financial Accounting Standards Board and the Securities and Exchange Commission.

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