Wrapping up Q3 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 14 thrifts & mortgage finance stocks we track reported a satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 5.5% while next quarter’s revenue guidance was 0.5% below.
While some thrifts & mortgage finance stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.7% 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 $1.78 billion, up 34.8% year on year. This print exceeded analysts’ expectations by 7.1%. Overall, it was an exceptional quarter for the company with a beat of analysts’ EPS estimates and an impressive beat of analysts’ net interest income estimates.
"Rocket delivered a standout quarter, balancing short and long term execution in a category of one. I am very proud of the Rocket team for surpassing the high end of our adjusted revenue guidance range, accelerating Redfin momentum and closing the Mr. Cooper transaction—the largest independent mortgage company deal in history," said Varun Krishna, CEO and Director of Rocket Companies.
Interestingly, the stock is up 5.8% since reporting and currently trades at $17.13.
Best Q3: 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 $82.76 million, up 23.6% year on year, outperforming analysts’ expectations by 4.9%. The business had an exceptional quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $13.76.
Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: WaFd Bank (NASDAQ: WAFD)
Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ: WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.
WaFd Bank reported revenues of $187.2 million, flat year on year, falling short of analysts’ expectations by 2%. It was a disappointing quarter as it posted a significant miss of analysts’ net interest income and EPS estimates.
Interestingly, the stock is up 9.9% since the results and currently trades at $30.60.
Read our full analysis of WaFd Bank’s results here.
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 $632.9 million, up 10.6% year on year. This number topped analysts’ expectations by 9.9%. Overall, it was an exceptional quarter as it also recorded a solid beat of analysts’ net interest income estimates and an impressive beat of analysts’ revenue estimates.
The stock is up 5.2% since reporting and currently trades at $127.20.
Ladder Capital (NYSE: LADR)
Founded during the 2008 financial crisis when traditional lenders retreated from commercial real estate, Ladder Capital (NYSE: LADR) is a real estate investment trust that originates commercial real estate loans, owns commercial properties, and invests in real estate securities.
Ladder Capital reported revenues of $57.48 million, down 15.4% year on year. This result missed analysts’ expectations by 0.7%. Taking a step back, it was a mixed quarter as it also logged a solid beat of analysts’ net interest income estimates but a significant miss of analysts’ tangible book value per share estimates.
The stock is down 2.5% since reporting and currently trades at $10.70.
Read our full, actionable report on Ladder Capital here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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