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What's in the Offing for Ready Capital's (RC) Q3 Earnings?
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Ready Capital Corporation (RC - Free Report) is scheduled to report third-quarter 2020 results on Nov 4, after the closing bell. The company’s quarterly earnings per share (EPS) is expected to have declined while net interest income (NII) might havewitnessed year-over-year increase.
In the last reported quarter, this commercial mortgage real estate investment trust (mREIT), posted core earnings of 70 cents per share, missing the Zacks Consensus Estimate of 73 cents. Decline in NII and higher unrealized losses on financial instrument hindered performance.
Over the trailing four quarters, the company missed the Zacks Consensus Estimate on three occasions and beat in the other. It delivered a negative surprise of 24.7%, on average, during this period. The graph below depicts this surprise history:
The backdrop of commercial real estate (“CRE”) markets improved in the third quarter, supported by an increase in transaction activity and commercial mortgage backed securities (“CMBS”) issuance. Moreover, continued tightening in credit spreads during the September-end quarter is good news for commercial mREITs. This, credit spread tightening is anticipated to have driven portfolio and book value growth for Ready Capital in the third quarter.
Markedly, regulatory support and the Federal Reserve’s mortgage backed securities purchase efforts have stabilized the mortgage market. This is expected to have resulted in recovery in asset values and might have contributed to Ready Capital’s book value growth in the third quarter.
Additionally, the company’s new lending initiatives and low interest rates may have bolstered origination pipelines during the third quarter, supporting its residential mortgage origination platform.
Importantly, forbearance rate has significantly declined in the July-September period. This along with the revival of direct small balance commercial (SBC) origination channels is encouraging for the company’s SBC loan credit third-quarter performance.
Moreover, the quality of the company’s SBC portfolio is also expected to have offered earnings stability to the company in the third quarter. In fact, majority of this portfolio consists of first-lien senior loans, with a weighted average loan-to-value (LTV) ratio of 64% (as of second quarter end). This is expected to have protected the company from potential losses in case of any property values declines, especially in the retail and lodging sector.
Further, during the quarter, Ready Capital announced a 20% sequential increase in quarterly dividend to 30 cents per share. This too indicates near-term strength in its earnings, supported by a favorable origination environment.
For the September-end quarter, NII estimate is pegged at $22.6 million, indicating year-over-year growth of 11%.
Lastly, prior to the third-quarter earnings release, the company’s activities were inadequate to gain analyst confidence. Accordingly, the Zacks Consensus Estimate for the company’s EPS has been unchanged at 36 cents over the past month. It also suggests a decline of 10% from the year-ago reported figure.
Here is what our quantitative model predicts:
Ready Capital has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Ready Capital is +3.74%.
Zacks Rank: The company sports a Zacks Rank #1 (Strong Buy).
Here are some otherstocks in the REIT sector that you may want to consider, as our model shows that thesetoohave the right combination of elements to report a beat this quarter:
Lexington Realty Trust (LXP - Free Report) , set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3.
National Storage Affiliates Trust (NSA - Free Report) , slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and a Zacks Rank of 2 (Buy) at present.
Ventas, Inc. (VTR - Free Report) , slated to release third-quarter earnings on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Shutterstock
What's in the Offing for Ready Capital's (RC) Q3 Earnings?
Ready Capital Corporation (RC - Free Report) is scheduled to report third-quarter 2020 results on Nov 4, after the closing bell. The company’s quarterly earnings per share (EPS) is expected to have declined while net interest income (NII) might havewitnessed year-over-year increase.
In the last reported quarter, this commercial mortgage real estate investment trust (mREIT), posted core earnings of 70 cents per share, missing the Zacks Consensus Estimate of 73 cents. Decline in NII and higher unrealized losses on financial instrument hindered performance.
Over the trailing four quarters, the company missed the Zacks Consensus Estimate on three occasions and beat in the other. It delivered a negative surprise of 24.7%, on average, during this period. The graph below depicts this surprise history:
Ready Capital Corp Price and EPS Surprise
Ready Capital Corp price-eps-surprise | Ready Capital Corp Quote
Factors to Note
The backdrop of commercial real estate (“CRE”) markets improved in the third quarter, supported by an increase in transaction activity and commercial mortgage backed securities (“CMBS”) issuance. Moreover, continued tightening in credit spreads during the September-end quarter is good news for commercial mREITs. This, credit spread tightening is anticipated to have driven portfolio and book value growth for Ready Capital in the third quarter.
Markedly, regulatory support and the Federal Reserve’s mortgage backed securities purchase efforts have stabilized the mortgage market. This is expected to have resulted in recovery in asset values and might have contributed to Ready Capital’s book value growth in the third quarter.
Additionally, the company’s new lending initiatives and low interest rates may have bolstered origination pipelines during the third quarter, supporting its residential mortgage origination platform.
Importantly, forbearance rate has significantly declined in the July-September period. This along with the revival of direct small balance commercial (SBC) origination channels is encouraging for the company’s SBC loan credit third-quarter performance.
Moreover, the quality of the company’s SBC portfolio is also expected to have offered earnings stability to the company in the third quarter. In fact, majority of this portfolio consists of first-lien senior loans, with a weighted average loan-to-value (LTV) ratio of 64% (as of second quarter end). This is expected to have protected the company from potential losses in case of any property values declines, especially in the retail and lodging sector.
Further, during the quarter, Ready Capital announced a 20% sequential increase in quarterly dividend to 30 cents per share. This too indicates near-term strength in its earnings, supported by a favorable origination environment.
For the September-end quarter, NII estimate is pegged at $22.6 million, indicating year-over-year growth of 11%.
Lastly, prior to the third-quarter earnings release, the company’s activities were inadequate to gain analyst confidence. Accordingly, the Zacks Consensus Estimate for the company’s EPS has been unchanged at 36 cents over the past month. It also suggests a decline of 10% from the year-ago reported figure.
Here is what our quantitative model predicts:
Ready Capital has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Ready Capital is +3.74%.
Zacks Rank: The company sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks That Warrant a Look
Here are some otherstocks in the REIT sector that you may want to consider, as our model shows that thesetoohave the right combination of elements to report a beat this quarter:
Lexington Realty Trust (LXP - Free Report) , set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3.
National Storage Affiliates Trust (NSA - Free Report) , slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and a Zacks Rank of 2 (Buy) at present.
Ventas, Inc. (VTR - Free Report) , slated to release third-quarter earnings on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>