Wrapping up Q2 earnings, we look at the numbers and key takeaways for the thrifts & mortgage finance stocks, including Rocket Companies (NYSE:RKT) and its peers.
Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.
The 18 thrifts & mortgage finance stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 29.8% while next quarter’s revenue guidance was in line.
In light of this news, share prices of the companies have held steady as they are up 1.1% on average since the latest earnings results.
Rocket Companies (NYSE:RKT)
Born in Detroit during the 1980s and evolving into a tech-driven financial powerhouse, Rocket Companies (NYSE:RKT) is a fintech company that provides digital mortgage lending, real estate services, and personal finance solutions through its technology platform.
Rocket Companies reported revenues of $1.36 billion, up 10.8% year on year. This print exceeded analysts’ expectations by 5.8%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ EPS and tangible book value per share estimates.
Interestingly, the stock is up 14.5% since reporting and currently trades at $16.91.
Best Q2: Ellington Financial (NYSE:EFC)
Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial (NYSE:EFC) acquires and manages a diverse portfolio of mortgage-related, consumer-related, and other financial assets to generate returns for investors.
Ellington Financial reported revenues of $92.54 million, up 1.5% year on year, outperforming analysts’ expectations by 11.5%. The business had a stunning quarter with an impressive beat of analysts’ tangible book value per share estimates and a solid beat of analysts’ EPS estimates.
The market seems content with the results as the stock is up 2.7% since reporting. It currently trades at $13.01.
Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Franklin BSP Realty Trust (NYSE:FBRT)
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE:FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Franklin BSP Realty Trust reported revenues of $50.78 million, up 171% year on year, falling short of analysts’ expectations by 8.9%. It was a disappointing quarter as it posted a significant miss of analysts’ net interest income estimates and a significant miss of analysts’ EPS estimates.
Interestingly, the stock is up 7.6% since the results and currently trades at $10.86.
Read our full analysis of Franklin BSP Realty Trust’s results here.
Two Harbors Investment (NYSE:TWO)
Operating in the complex world of mortgage finance since 2009, Two Harbors Investment (NYSE:TWO) is a real estate investment trust that invests in mortgage servicing rights and agency residential mortgage-backed securities.
Two Harbors Investment reported revenues of -$12.28 million, down 111% year on year. This result missed analysts’ expectations by 111%. It was a slower quarter as it also recorded a significant miss of analysts’ EPS estimates and a slight miss of analysts’ tangible book value per share estimates.
The stock is down 3.7% since reporting and currently trades at $9.97.
Read our full, actionable report on Two Harbors Investment here, it’s free.
PennyMac Financial Services (NYSE:PFSI)
Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services (NYSE:PFSI) is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.
PennyMac Financial Services reported revenues of $444.7 million, up 9.5% year on year. This number came in 19.8% below analysts' expectations. Taking a step back, it was still a strong quarter as it recorded a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ net interest income estimates.
The stock is down 6% since reporting and currently trades at $98.12.
Read our full, actionable report on PennyMac Financial Services here, it’s free.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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