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What's in Store for Ready Capital (RC) This Earnings Season?
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Ready Capital Corporation (RC - Free Report) is scheduled to report first-quarter 2022 results on May 5, after the closing bell. The company is expected to have witnessed year-over-year growth in net interest income (NII) and earnings.
In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing small-to-medium balance commercial loans, posted distributable earnings per share of 67 cents. NII before provision for loan losses of $63.7 million declined 65% year over year.
In the first quarter, shares of Ready Capital declined narrower than the industry.
Image Source: Zacks Investment Research
Factors at Play
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the first quarter of 2022 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities underperformed.
Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. The strength in originations in 2021, propelled by the ultra-low rates, is also making comparison difficult for the quarter. Notably, mortgage rates rose in the quarter under review.
As of the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rate of around 3%. This led to a drastic fall in mortgage origination activities, with steadily rising rates hurting refinancing.
Amid this backdrop, Ready Capital’s residential mortgage banking segment is expected to have witnessed normalization in residential originations, thereby affecting revenues from the gain on sale.
Nonetheless, the company is expected to have reaped benefits from its inorganic growth moves that have increased scale and expanded capabilities. Also, its diversified and recurring revenues from stabilized net interest and servicing revenues are expected to have driven top-line growth.
The company provides life-cycle financing to small-balance commercial properties and this has likely provided it a competitive edge over peers. Decent demand in its small-balance commercial portfolios is anticipated to have driven loan growth.
Despite a challenging environment in first-quarter 2022, Ready Capital announced the closing of more than 70 bridge loans, aggregating more than $1.9 billion, for its National Bridge Lending Platform.
This is likely to have aided NII in the quarter. The Zacks Consensus Estimate for the company’s quarterly NII is pegged at $71.5 million, suggesting an improvement of 216.3% on a year-over-year basis.
Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the first-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 59 cents over the past month. It suggests a year-over-year rise of 43.9%.
Here is what our quantitative model predicts:
Ready Capital has the right combination of the two key ingredients — a positive Earnings ESP and a 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 +10.80%.
Image: Bigstock
What's in Store for Ready Capital (RC) This Earnings Season?
Ready Capital Corporation (RC - Free Report) is scheduled to report first-quarter 2022 results on May 5, after the closing bell. The company is expected to have witnessed year-over-year growth in net interest income (NII) and earnings.
In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing small-to-medium balance commercial loans, posted distributable earnings per share of 67 cents. NII before provision for loan losses of $63.7 million declined 65% year over year.
In the first quarter, shares of Ready Capital declined narrower than the industry.
Image Source: Zacks Investment Research
Factors at Play
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the first quarter of 2022 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities underperformed.
Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. The strength in originations in 2021, propelled by the ultra-low rates, is also making comparison difficult for the quarter. Notably, mortgage rates rose in the quarter under review.
As of the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rate of around 3%. This led to a drastic fall in mortgage origination activities, with steadily rising rates hurting refinancing.
Amid this backdrop, Ready Capital’s residential mortgage banking segment is expected to have witnessed normalization in residential originations, thereby affecting revenues from the gain on sale.
Nonetheless, the company is expected to have reaped benefits from its inorganic growth moves that have increased scale and expanded capabilities. Also, its diversified and recurring revenues from stabilized net interest and servicing revenues are expected to have driven top-line growth.
The company provides life-cycle financing to small-balance commercial properties and this has likely provided it a competitive edge over peers. Decent demand in its small-balance commercial portfolios is anticipated to have driven loan growth.
Despite a challenging environment in first-quarter 2022, Ready Capital announced the closing of more than 70 bridge loans, aggregating more than $1.9 billion, for its National Bridge Lending Platform.
This is likely to have aided NII in the quarter. The Zacks Consensus Estimate for the company’s quarterly NII is pegged at $71.5 million, suggesting an improvement of 216.3% on a year-over-year basis.
Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the first-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 59 cents over the past month. It suggests a year-over-year rise of 43.9%.
Here is what our quantitative model predicts:
Ready Capital has the right combination of the two key ingredients — a positive Earnings ESP and a 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 +10.80%.
Zacks Rank: Ready Capital currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Lending Tree (TREE - Free Report) is slated to announce first-quarter 2022 results on May 5. The company currently carries a Zacks Rank #3.
TREE’s earnings estimates for the to-be-reported quarter have been unchanged over the past 30 days.
Host Hotels & Resorts (HST - Free Report) is scheduled to report quarterly figures on May 4. Host Hotels currently sports a Zacks Rank of 1.
HST’s earnings estimates for the to-be-reported quarter have been revised marginally upward over the past 30 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.