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Rithm Capital (RITM) Shares Down 4.3% Despite Q4 Earnings Beat
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Shares of Rithm Capital Corp. (RITM - Free Report) lost 4.3% since it reported fourth-quarter 2023 results on Feb 6, 2024. The quarterly results were affected by an elevated expense level, lower net servicing revenues and interest income. Improved asset management revenues and continuous acquisition of customer loans added some respite.
RITM reported fourth-quarter 2023 adjusted earnings of 51 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 45.7%. The bottom line rose 54.5% year over year.
Revenues amounted to $709 million, which tumbled 7% year over year in the quarter under review. The top line missed the consensus mark by 20%.
Rithm Capital Corp. Price, Consensus and EPS Surprise
Net servicing revenues of Rithm Capital amounted to $15.9 million, which plummeted 94.5% year over year in the fourth quarter and missed the Zacks Consensus Estimate by a huge margin. Interest income increased 24.3% year over year to $454.3 million, lower than the consensus mark of $455 million.
Gain on originated residential mortgage loans, held for sale, net, fell 7.4% year over year to $98.1 million, which missed the consensus estimate of $141 million.
Total expenses of $814.5 million increased 19.7% year over year in the quarter under review due to higher interest expenses and warehouse line fees and compensation and benefits.
RITM’s pretax income deteriorated more than one-fold year over year to a loss of $37.3 million in the fourth quarter. Net loss of $67.2 million deteriorated more than one-fold year over year.
Segmental Update
The company now reports its operations under the following segments:
Origination and Servicing: Net servicing revenues amounted to a negative $7.5 million due to a change in the fair value of MSR financing receivables and MSRs. The prior-quarter figure for the metric was $468.5 million. The segment’s interest income dropped 11.7% quarter over quarter to $138.3 million in the fourth quarter.
The segment’s revenues of $228.8 million plunged 70.3% quarter over quarter in the quarter under review. Pre-tax income came in at a negative figure of $120.9 million, implying a loss. The previous quarter's figure for pre-tax income was $412.5 million.
Investment Portfolio: The segment’s net servicing revenues of $23.4 million surged nearly six-fold quarter over quarter in the fourth quarter. Interest income declined 5.2% quarter over quarter to $246.9 million. Total revenues increased 2.4% quarter over quarter to $328.9 million. Pre-tax income came in at $112 million against the loss of $108.3 million in the prior quarter.
Mortgage Loans Receivable: Revenues of $65.3 million advanced 9.9% quarter over quarter in the fourth quarter. The unit’s pre-tax loss came in at $9.3 million compared with $19 million in the prior quarter.
Asset Management: Interest income and asset management revenues came in at $3.8 million and $82.7 million, respectively, in the fourth quarter of 2023. Pre-tax income came in at $28.5 million in the quarter under review.
Acquisition Update
The company completed the acquisition of Sculptor on Nov 17, 2023, in a bid to expand its investment opportunities into real estate, multi-strategy and credit. Sculptor has assets under management worth $33 billion on Dec 31, 2023.
The company entered into a definitive agreement to acquire Computershare Mortgage Services for $720 million. This transaction is expected to close by the first quarter of 2024.
Full-Year Update
Total revenues declined 23.3% to $3.8 billion in 2023. Total expenses declined 12.1% to $2.9 billion in 2023. Income before income taxes declined 40.4% to $752.8 million in 2023.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. It approved a new share repurchase program for shares worth $200 million through Dec 31, 2024. Management also paid out a quarterly common dividend of 25 cents per share.
Financial Update (as of Dec 31, 2023)
Rithm Capital exited the fourth quarter with cash and cash equivalents of $1.29 billion, which decreased from the 2022-end level of $1.33 billion. Total assets of $35.3 billion rose from $32.5 billion at 2022-end.
Debt amounted to $24 billion, up from $21.9 billion at 2022-end.
Total equity of $7.1 billion was up from $7 billion at 2022-end.
The Travelers Companies (TRV - Free Report) reported fourth-quarter 2023 core income of $7.01 per share, which beat the Zacks Consensus Estimate of $5.04. The bottom line more than doubled year over year, driven by higher underlying underwriting gain, lower catastrophe losses and higher net investment income. Travelers’ total revenues increased 13.5% from the year-ago quarter to $10.9 billion, primarily driven by higher premiums. The top-line figure beat the Zacks Consensus Estimate by 0.2%.
Net written premiums increased 13% year over year to about $10 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.7 billion. TRV witnessed an underwriting gain of $1.4 billion, up more than three-fold year over year, driven by higher business volumes. The combined ratio improved 870 bps year over year to 85.8, driven by a lower underlying combined ratio and catastrophe losses.
The Progressive Corporation’s (PGR - Free Report) fourth-quarter 2023 earnings per share of $2.96 beat the Zacks Consensus Estimate of $2.38. The bottom line improved 97.3% year over year. Operating revenues of $16.6 billion beat the Zacks Consensus Estimate by 3% and increased 23.2% year over year.
Net premiums written were $15.1 billion in the quarter, up 21% from $12.5 billion a year ago. PGR’s premiums beat our estimate of $14 billion. Net premiums earned grew 22% to $15.8 billion and beat our estimate of $14.8 billion.
Progressive’s combined ratio improved 520 bps from the prior-year quarter’s level to 88.7.
W.R. Berkley Corporation’s (WRB - Free Report) fourth-quarter 2023 operating income of $1.45 per share beat the Zacks Consensus Estimate of $1.35 by 7.4%. The bottom line improved 25% year over year. Operating revenues came in at $3.2 billion, up 9.3% year over year, on the back of higher net premiums earned, as well as improved net investment income. The top line beat the consensus estimate by 1.3%.
W.R. Berkley’s net premiums written were $2.7 billion, up 12% year over year. The figure was lower than our estimate of $2.8 billion. Pre-tax underwriting income increased 8.2% to $315.9 million. The consolidated combined ratio remained flat year over year at 88.4.
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Rithm Capital (RITM) Shares Down 4.3% Despite Q4 Earnings Beat
Shares of Rithm Capital Corp. (RITM - Free Report) lost 4.3% since it reported fourth-quarter 2023 results on Feb 6, 2024. The quarterly results were affected by an elevated expense level, lower net servicing revenues and interest income. Improved asset management revenues and continuous acquisition of customer loans added some respite.
RITM reported fourth-quarter 2023 adjusted earnings of 51 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 45.7%. The bottom line rose 54.5% year over year.
Revenues amounted to $709 million, which tumbled 7% year over year in the quarter under review. The top line missed the consensus mark by 20%.
Rithm Capital Corp. Price, Consensus and EPS Surprise
Rithm Capital Corp. price-consensus-eps-surprise-chart | Rithm Capital Corp. Quote
Q4 Operations
Net servicing revenues of Rithm Capital amounted to $15.9 million, which plummeted 94.5% year over year in the fourth quarter and missed the Zacks Consensus Estimate by a huge margin. Interest income increased 24.3% year over year to $454.3 million, lower than the consensus mark of $455 million.
Gain on originated residential mortgage loans, held for sale, net, fell 7.4% year over year to $98.1 million, which missed the consensus estimate of $141 million.
Total expenses of $814.5 million increased 19.7% year over year in the quarter under review due to higher interest expenses and warehouse line fees and compensation and benefits.
RITM’s pretax income deteriorated more than one-fold year over year to a loss of $37.3 million in the fourth quarter. Net loss of $67.2 million deteriorated more than one-fold year over year.
Segmental Update
The company now reports its operations under the following segments:
Origination and Servicing: Net servicing revenues amounted to a negative $7.5 million due to a change in the fair value of MSR financing receivables and MSRs. The prior-quarter figure for the metric was $468.5 million. The segment’s interest income dropped 11.7% quarter over quarter to $138.3 million in the fourth quarter.
The segment’s revenues of $228.8 million plunged 70.3% quarter over quarter in the quarter under review. Pre-tax income came in at a negative figure of $120.9 million, implying a loss. The previous quarter's figure for pre-tax income was $412.5 million.
Investment Portfolio: The segment’s net servicing revenues of $23.4 million surged nearly six-fold quarter over quarter in the fourth quarter. Interest income declined 5.2% quarter over quarter to $246.9 million. Total revenues increased 2.4% quarter over quarter to $328.9 million. Pre-tax income came in at $112 million against the loss of $108.3 million in the prior quarter.
Mortgage Loans Receivable: Revenues of $65.3 million advanced 9.9% quarter over quarter in the fourth quarter. The unit’s pre-tax loss came in at $9.3 million compared with $19 million in the prior quarter.
Asset Management: Interest income and asset management revenues came in at $3.8 million and $82.7 million, respectively, in the fourth quarter of 2023. Pre-tax income came in at $28.5 million in the quarter under review.
Acquisition Update
The company completed the acquisition of Sculptor on Nov 17, 2023, in a bid to expand its investment opportunities into real estate, multi-strategy and credit. Sculptor has assets under management worth $33 billion on Dec 31, 2023.
The company entered into a definitive agreement to acquire Computershare Mortgage Services for $720 million. This transaction is expected to close by the first quarter of 2024.
Full-Year Update
Total revenues declined 23.3% to $3.8 billion in 2023. Total expenses declined 12.1% to $2.9 billion in 2023. Income before income taxes declined 40.4% to $752.8 million in 2023.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. It approved a new share repurchase program for shares worth $200 million through Dec 31, 2024. Management also paid out a quarterly common dividend of 25 cents per share.
Financial Update (as of Dec 31, 2023)
Rithm Capital exited the fourth quarter with cash and cash equivalents of $1.29 billion, which decreased from the 2022-end level of $1.33 billion. Total assets of $35.3 billion rose from $32.5 billion at 2022-end.
Debt amounted to $24 billion, up from $21.9 billion at 2022-end.
Total equity of $7.1 billion was up from $7 billion at 2022-end.
Zacks Rank
Rithm Capital currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Sector Releases
The Travelers Companies (TRV - Free Report) reported fourth-quarter 2023 core income of $7.01 per share, which beat the Zacks Consensus Estimate of $5.04. The bottom line more than doubled year over year, driven by higher underlying underwriting gain, lower catastrophe losses and higher net investment income. Travelers’ total revenues increased 13.5% from the year-ago quarter to $10.9 billion, primarily driven by higher premiums. The top-line figure beat the Zacks Consensus Estimate by 0.2%.
Net written premiums increased 13% year over year to about $10 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.7 billion. TRV witnessed an underwriting gain of $1.4 billion, up more than three-fold year over year, driven by higher business volumes. The combined ratio improved 870 bps year over year to 85.8, driven by a lower underlying combined ratio and catastrophe losses.
The Progressive Corporation’s (PGR - Free Report) fourth-quarter 2023 earnings per share of $2.96 beat the Zacks Consensus Estimate of $2.38. The bottom line improved 97.3% year over year. Operating revenues of $16.6 billion beat the Zacks Consensus Estimate by 3% and increased 23.2% year over year.
Net premiums written were $15.1 billion in the quarter, up 21% from $12.5 billion a year ago. PGR’s premiums beat our estimate of $14 billion. Net premiums earned grew 22% to $15.8 billion and beat our estimate of $14.8 billion.
Progressive’s combined ratio improved 520 bps from the prior-year quarter’s level to 88.7.
W.R. Berkley Corporation’s (WRB - Free Report) fourth-quarter 2023 operating income of $1.45 per share beat the Zacks Consensus Estimate of $1.35 by 7.4%. The bottom line improved 25% year over year. Operating revenues came in at $3.2 billion, up 9.3% year over year, on the back of higher net premiums earned, as well as improved net investment income. The top line beat the consensus estimate by 1.3%.
W.R. Berkley’s net premiums written were $2.7 billion, up 12% year over year. The figure was lower than our estimate of $2.8 billion. Pre-tax underwriting income increased 8.2% to $315.9 million. The consolidated combined ratio remained flat year over year at 88.4.