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Rithm (RITM) Rises 1.6% Since Q1 Earnings Beat: Growth Ahead?
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Shares of Rithm Capital Corp. (RITM - Free Report) have gained 1.6% since it reported strong first-quarter 2024 results on Apr 30, 2024. The quarterly results were supported by a solid performance of its servicing portfolio. Gain on sale margins exhibited signs of recovery during the quarter, although there is still some ground to cover to reach their levels from a year ago.
The growing strength of the Newrez business in the first quarter contributed to the positive results. The increasing market share of Newrez's origination platform and organic growth in its third-party servicing franchise are likely to sustain the positive momentum in the future.
The company is exploring the possibility of spinning off its mortgage business or conducting an initial public offering. It is collaborating with advisors to pursue a favorable outcome for the business, which it believes is undervalued.
During the March quarter, the company hedged the majority of its mortgage servicing rights risk. This strategic action is expected to bolster stability, enabling it to navigate through market volatility and maintain consistent profit levels.
Rithm Capital Corp. Price, Consensus and EPS Surprise
The company's strategic initiatives and solid first-quarter performance suggest a strong start to the year. If it can sustain this momentum, it will bolster investor confidence, positioning the shares for more growth in the coming days. Now, let’s take a look at how well RITM performed in the first quarter.
Q1 Performance
RITM reported first-quarter 2024 adjusted earnings of 48 cents per share, which outpaced the Zacks Consensus Estimate of 41 cents. Also, the bottom line rose 37.1% year over year.
Revenues amounted to almost $1.3 billion, which jumped 52.8% year over year in the quarter under review. The top line also beat the consensus mark by 18.7%.
Let’s delve deeper.
Net servicing revenues of Rithm Capital amounted to $554.4 million, which gained 69.3% year over year in the first quarter and beat the Zacks Consensus Estimate by 50.2%. Interest income increased 29.3% year over year to $448.2 million but missed the consensus mark by 2.4%.
Gain on originated residential mortgage loans, held for sale, net, rose 36.9% year over year to $149.5 million, which beat the consensus estimate by 41%.
Total expenses of $845.3 million increased 27.1% year over year in the quarter under review due to higher interest expenses and warehouse line fees, G&A expenses and compensation and benefits.
RITM’s pretax income jumped to $380.9 million in the first quarter from $73.1 million a year ago.
Segmental Update
Origination and Servicing: Net servicing revenues amounted to $490.8 million, up from $311.9 million in the prior-year quarter. The segment’s interest income of $140 million rose from $109.8 million a year ago. The segment’s revenues of $776.7 million jumped from $529.9 million year over year. Pre-tax income came in at $408.1 million, up from $164 million a year ago.
Investment Portfolio: The segment’s net servicing revenues of $63.5 million jumped from $15.6 million in the year-ago quarter. Interest income was at $234.5 million, up from $178.5 million a year ago. Total revenues increased to $360.1 million from $253.3 million a year ago. Pre-tax loss came in at $15.4 million, narrowing from the loss of $64.7 million in the prior quarter.
Mortgage Loans Receivable: Revenues of $73.7 million advanced from $58.3 million. The unit’s pre-tax income came in at $41.1 million compared with $8.3 million in the prior-year quarter.
Asset Management: Total revenues came in at $75.9 million in the first quarter of 2024. Pre-tax loss was at $29.7 million in the quarter under review.
Financial Update (as of Mar 31, 2024)
Rithm Capital exited the first quarter with cash and cash equivalents of $1.14 billion, which decreased from the 2023-end level of $1.29 billion. Total assets of $42.12 billion rose from $35.31 billion at 2023-end.
Debt amounted to almost $29.5 billion, up from around $24 billion at 2023-end.
Total equity of $7.2 billion was up from $7.1 billion at 2023-end.
Net cash used in operations was at $1.14 billion in the first quarter against net cash from operations of $1.18 billion a year ago.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. It had a share repurchase program of $200 million of common stock in place through Dec 31, 2024. Management also paid out a quarterly common dividend of 25 cents per share, totaling $120.9 million.
Zacks Rank & Key Picks
Rithm Capital currently has a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings indicates 27.4% year-over-year growth. JXN beat earnings estimates twice in the past four quarters and missed on the other occasions. The consensus mark for current year revenues predicts a 115.1% jump from a year ago.
The Zacks Consensus Estimate for Euronet Worldwide’s 2024 earnings indicates 15.8% year-over-year growth. During the past month, EEFT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.3%.
The Zacks Consensus Estimate for CleanSpark’s current-year earnings suggests a 140.3% year-over-year improvement. During the past month, CLSK has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current year revenues suggests a 183.6% surge from a year ago.
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Rithm (RITM) Rises 1.6% Since Q1 Earnings Beat: Growth Ahead?
Shares of Rithm Capital Corp. (RITM - Free Report) have gained 1.6% since it reported strong first-quarter 2024 results on Apr 30, 2024. The quarterly results were supported by a solid performance of its servicing portfolio. Gain on sale margins exhibited signs of recovery during the quarter, although there is still some ground to cover to reach their levels from a year ago.
The growing strength of the Newrez business in the first quarter contributed to the positive results. The increasing market share of Newrez's origination platform and organic growth in its third-party servicing franchise are likely to sustain the positive momentum in the future.
The company is exploring the possibility of spinning off its mortgage business or conducting an initial public offering. It is collaborating with advisors to pursue a favorable outcome for the business, which it believes is undervalued.
During the March quarter, the company hedged the majority of its mortgage servicing rights risk. This strategic action is expected to bolster stability, enabling it to navigate through market volatility and maintain consistent profit levels.
Rithm Capital Corp. Price, Consensus and EPS Surprise
Rithm Capital Corp. price-consensus-eps-surprise-chart | Rithm Capital Corp. Quote
The company's strategic initiatives and solid first-quarter performance suggest a strong start to the year. If it can sustain this momentum, it will bolster investor confidence, positioning the shares for more growth in the coming days. Now, let’s take a look at how well RITM performed in the first quarter.
Q1 Performance
RITM reported first-quarter 2024 adjusted earnings of 48 cents per share, which outpaced the Zacks Consensus Estimate of 41 cents. Also, the bottom line rose 37.1% year over year.
Revenues amounted to almost $1.3 billion, which jumped 52.8% year over year in the quarter under review. The top line also beat the consensus mark by 18.7%.
Let’s delve deeper.
Net servicing revenues of Rithm Capital amounted to $554.4 million, which gained 69.3% year over year in the first quarter and beat the Zacks Consensus Estimate by 50.2%. Interest income increased 29.3% year over year to $448.2 million but missed the consensus mark by 2.4%.
Gain on originated residential mortgage loans, held for sale, net, rose 36.9% year over year to $149.5 million, which beat the consensus estimate by 41%.
Total expenses of $845.3 million increased 27.1% year over year in the quarter under review due to higher interest expenses and warehouse line fees, G&A expenses and compensation and benefits.
RITM’s pretax income jumped to $380.9 million in the first quarter from $73.1 million a year ago.
Segmental Update
Origination and Servicing: Net servicing revenues amounted to $490.8 million, up from $311.9 million in the prior-year quarter. The segment’s interest income of $140 million rose from $109.8 million a year ago. The segment’s revenues of $776.7 million jumped from $529.9 million year over year. Pre-tax income came in at $408.1 million, up from $164 million a year ago.
Investment Portfolio: The segment’s net servicing revenues of $63.5 million jumped from $15.6 million in the year-ago quarter. Interest income was at $234.5 million, up from $178.5 million a year ago. Total revenues increased to $360.1 million from $253.3 million a year ago. Pre-tax loss came in at $15.4 million, narrowing from the loss of $64.7 million in the prior quarter.
Mortgage Loans Receivable: Revenues of $73.7 million advanced from $58.3 million. The unit’s pre-tax income came in at $41.1 million compared with $8.3 million in the prior-year quarter.
Asset Management: Total revenues came in at $75.9 million in the first quarter of 2024. Pre-tax loss was at $29.7 million in the quarter under review.
Financial Update (as of Mar 31, 2024)
Rithm Capital exited the first quarter with cash and cash equivalents of $1.14 billion, which decreased from the 2023-end level of $1.29 billion. Total assets of $42.12 billion rose from $35.31 billion at 2023-end.
Debt amounted to almost $29.5 billion, up from around $24 billion at 2023-end.
Total equity of $7.2 billion was up from $7.1 billion at 2023-end.
Net cash used in operations was at $1.14 billion in the first quarter against net cash from operations of $1.18 billion a year ago.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. It had a share repurchase program of $200 million of common stock in place through Dec 31, 2024. Management also paid out a quarterly common dividend of 25 cents per share, totaling $120.9 million.
Zacks Rank & Key Picks
Rithm Capital currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Finance space are Jackson Financial Inc. (JXN - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) and CleanSpark, Inc. (CLSK - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), Euronet Worldwide and CleanSpark carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings indicates 27.4% year-over-year growth. JXN beat earnings estimates twice in the past four quarters and missed on the other occasions. The consensus mark for current year revenues predicts a 115.1% jump from a year ago.
The Zacks Consensus Estimate for Euronet Worldwide’s 2024 earnings indicates 15.8% year-over-year growth. During the past month, EEFT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.3%.
The Zacks Consensus Estimate for CleanSpark’s current-year earnings suggests a 140.3% year-over-year improvement. During the past month, CLSK has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current year revenues suggests a 183.6% surge from a year ago.