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'Remain Cautious On Mortgage Originators': Rocket Companies Analysts React To Mixed Q1 Earnings

By Wayne Duggan

Rocket Companies Inc (NYSE:RKT) shares are trading lower by 5.5% after the mortgage lender reported a sharp decline in revenue.

On Tuesday afternoon, Rocket reported first-quarter adjusted EPS of 15 cents, missing consensus analyst estimates of 19 cents. Revenue for the quarter was $2.67 billion, beating Wall Street's expectations of $2.17 billion. Revenue was down 41% from a year ago.

Rocket reported closed loan origination volume of nearly $54 billion, down from $103.5 billion in the first quarter of 2021. Gain on sale margin of 3.01% was also down from 3.74% a year ago.

Looking ahead, Rocket guided for second-quarter closed loan volume of between $35 billion and $40 billion and gain on sale margins of between 2.6% and 2.9%.

Related Link: Rocket Companies Q1 Earnings Takeaways: Revenue And EPS Fall, Refinances And Cash-Out Mortgages See Strength

Voices From The Street: Credit Suisse analyst Douglas Harter said Rocket's weak origination volumes and lackluster guidance were not surprising given recent reports by mortgage peers.

"GOS revenue (lower volume) and other income (Amrock) were below expectations and were partially offset by lower expenses and higher servicing income (lower amortization expense) to result in the miss vs. our expectations," Harter wrote in a note. Credit Suisse has a Neutral rating and $11 target.

Bank of America analyst Mihir Bhatia said surprisingly low operating expense guidance was a silver lining in an otherwise disappointing report.

"That said, higher rates and robust competition are continuing headwinds that will impact volumes, margins and returns over the near-to-medium term," Bhatia wrote. Bank of America has an Underperform rating and $8 target.

Wells Fargo analyst Donald Fandetti said bearish hedge funds see normalized EPS of only around 70 cents for Rocket.

"We believe the risk is on the upside for the US 10-year Treasury yield, therefore we remain cautious on mortgage originators," Fandetti wrote. Wells Fargo has an Equal-Weight rating and $8 target.

RKT Price Action: The stock is trading around $7.37 per share at press time.

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Dive Deeper:
Rocket Companies Q1 Earnings Takeaways: Revenue And EPS Fall, Refinances And Cash-Out Mortgages See Strength
Rocket Companies Inc (NYSE: RKT) reported first-quarter financial results after market close Tuesday. Here are the key highlights.
Why Rocket Companies Shares Are Falling
Rocket Companies Inc (NYSE: RKT) shares are trading lower Wednesday after the company announced financial results.
Why These Beyond Meat Analysts Are Barbecuing Price Targets After $100M Q1 Loss: 'Lower Likelihood Of Disruption'
Beyond Meat Inc (NASDAQ: BYND) shares traded higher Thursday before moving lower in the afternoon, and remain down 56.6% year-to-date after…
United Wholesale Mortgage shares jump on record purchase volume as profit drops 47%
United Wholesale Mortgage Holdings Corp. on Tuesday said net income dropped 47% year-over-year in the first three months of 2022…
One subscription that gives you access to news from hundreds of sites
7 Walt Disney Analysts React To Q2 Earnings Miss, Subscriber Beat, Ongoing Asia Weakness
Walt Disney Co (NYSE: DIS) shares traded lower by 3.7% on Thursday after the company reported first-quarter earnings and said…
US Foods Q1 Earnings Lags Street View; Reaffirms FY22 Outlook
US Foods Holding Corp (NYSE:USFD) reported first-quarter FY22 sales growth of 23.9% year-on-year, to $7.8 billion, missing the consensus of $8.59 billion. Total…
Get all your news in one place