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PennyMac (PFSI) Q2 Earnings Beat Estimates on Higher Revenues

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PennyMac Financial Services, Inc. (PFSI - Free Report) reported second-quarter 2020 earnings per share of $4.39, beating the Zacks Consensus Estimate of $3.04. Further, the figure comes in significantly above the prior-year quarter’s 92 cents per share.

Higher revenues on the back of a rise in loan origination fees aided the results. Also, the liquidity position remained strong. However, higher expenses were an undermining factor.

The company reported net income of $352.7 million compared with $72.7 million recorded in the year-ago quarter.

Revenues Increase, Costs Rise

Total net revenues more than doubled year over year to $821.6 million in the second quarter of 2020. The increase primarily stemmed from a substantial rise in net gains on loans held for sale at fair value along with higher loan origination fees (up 59.6%), partly offset by a fall in net loan servicing fees (down 62.2%) and net interest income. The reported figure also surpassed the Zacks Consensus Estimate of $677 million.

Total expenses were $341.3 million, up 67.8% from the prior-year quarter. This rise chiefly resulted from higher volumes of activity in the production segment.

Balance Sheet

As of Jun 30, 2020, cash and cash equivalents were $910.3 million compared with $878.8 million in the prior quarter.

PennyMac’s total assets amounted to $23.2 billion, up from $10.9 million recorded as of Mar 31, 2020. Book value per share increased to $34.26 from $29.85 as of Mar 31, 2020.

Capital Deployment Update

The company’s board of directors increased the second-quarter common stock dividend by 25%. The new dividend will be paid out on Aug 28 to shareholders of record as of Aug 17, 2020.

Conclusion

PennyMac put up a decent performance during the April-June period. The company’s move to develop production technology seems to be working well. Also, its focus on long-term growth of its direct lending platforms augurs well for the long haul.

Currently, PennyMac sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Finance Stocks

First Republic Bank delivered an earnings surprise of 16.7% in second-quarter 2020 aided by solid top-line strength. Earnings per share of $1.40 surpassed the Zacks Consensus Estimate of $1.20. Additionally, the bottom line climbed 12.9% from the year-ago quarter.

First Horizon National Corporation (FHN - Free Report) reported second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line was 52.4% lower than the year-ago figure.

LendingTree (TREE - Free Report) reported second-quarter 2020 adjusted net income per share of 46 cents, missing the Zacks Consensus Estimate of 61 cents. Further, the figure comes in lower than the prior-year quarter’s $1.18 per share.

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