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Will Home-Sale Slump Mar New Residential's (NRZ) Q3 Earnings?
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New Residential Investment Corp. is scheduled to report third-quarter results on Oct 25, before the market opens. The company’s results will likely display year-over-year decline in its earnings per share (EPS) and net interest income (NII).
In the last reported quarter, this New York-based mortgage real estate investment trust (REIT), which primarily focuses on residential real estate investments, posted core earnings of 58 cents per share, comfortably surpassing the Zacks Consensus Estimate by 7.41%. However, net interest income (NII) of nearly $270 million declined 24.4% year over year.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in one occasion, missed in two and met in the other. It delivered an average negative surprise of 10.03% during this period. The graph below depicts this surprise history:
New Residential Investment Corp. Price and EPS Surprise
Let’s see how things are shaping up prior to this announcement.
Factors at Play
As a leading capital provider to the U.S. mortgage industry, the company is expected to have benefited from its access to sound financial resources in the Jul-Sep quarter. It remains well capitalized to execute accretive investment opportunities.
Also, in July 2018, New Residential closed the previously-announced acquisition of Shellpoint — a mortgage origination and servicing company. With an impressive mortgage origination platform and superior 3rd party servicing capabilities, the acquisition is anticipated to have strengthened New Residential’s servicing capabilities and diversify its revenue base.
Further, encouraging macroeconomic indicators and a favorable housing market backdrop will likely have buoyed home sales during the quarter under review. This, in turn, is expected to have supported residential mortgage loan investments.
However, the mortgage industry continues to be challenged by rising mortgage rates and property prices. Specifically, rise in the average mortgage rate for a 30-year fixed-term loan has led to a decline in mortgage origination volumes in the third quarter. Moreover, yield-curve flattening and rising interest rates have significantly compressed margins for loan originators.
Amid these, affordability hurdles and higher borrowing costs have kept home buyers on the sidelines. Also, amid rising interest rates, few borrowers are likely to have taken the opportunity to refinance, and opted to hold onto lower rates of their existing mortgages. These factors might have reduced refinancing loans originated by the company.
Hence, there is lack of any solid catalyst prior to the third-quarter earnings release. As such, the Zacks Consensus Estimate of EPS for the to-be-reported quarter remained unchanged at 56 cents, over the past month. The figure also reflects a year-over-year decline of 12.5%.
Earnings Whispers
Our proven model does not conclusively show that New Residential is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earning ESP: New Residential’s Earnings ESP is -2.7%.
Zacks Rank: The company currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.
Stocks That Warrant a Look
While the other players in this space are lined up to report financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.
Granite Point Mortgage Trust Inc. (GPMT - Free Report) , slated to report third-quarter results on Nov 5, has an Earnings ESP of +1.7% and holds a Zacks Rank of 2.
Hannon Armstrong Sustainable Infrastructure Capital, Inc (HASI - Free Report) , set to release Sep-end quarter figures on Nov 7, has an Earnings ESP of +7.69% and a Zacks Rank of 3.
Two Harbors Investments Corp (TWO - Free Report) , scheduled to report quarterly numbers on Nov 6, has an Earnings ESP of +0.7% and carries a Zacks Rank of 3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Will Home-Sale Slump Mar New Residential's (NRZ) Q3 Earnings?
New Residential Investment Corp. is scheduled to report third-quarter results on Oct 25, before the market opens. The company’s results will likely display year-over-year decline in its earnings per share (EPS) and net interest income (NII).
In the last reported quarter, this New York-based mortgage real estate investment trust (REIT), which primarily focuses on residential real estate investments, posted core earnings of 58 cents per share, comfortably surpassing the Zacks Consensus Estimate by 7.41%. However, net interest income (NII) of nearly $270 million declined 24.4% year over year.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in one occasion, missed in two and met in the other. It delivered an average negative surprise of 10.03% during this period. The graph below depicts this surprise history:
New Residential Investment Corp. Price and EPS Surprise
New Residential Investment Corp. Price and EPS Surprise | New Residential Investment Corp. Quote
Let’s see how things are shaping up prior to this announcement.
Factors at Play
As a leading capital provider to the U.S. mortgage industry, the company is expected to have benefited from its access to sound financial resources in the Jul-Sep quarter. It remains well capitalized to execute accretive investment opportunities.
Also, in July 2018, New Residential closed the previously-announced acquisition of Shellpoint — a mortgage origination and servicing company. With an impressive mortgage origination platform and superior 3rd party servicing capabilities, the acquisition is anticipated to have strengthened New Residential’s servicing capabilities and diversify its revenue base.
Further, encouraging macroeconomic indicators and a favorable housing market backdrop will likely have buoyed home sales during the quarter under review. This, in turn, is expected to have supported residential mortgage loan investments.
However, the mortgage industry continues to be challenged by rising mortgage rates and property prices. Specifically, rise in the average mortgage rate for a 30-year fixed-term loan has led to a decline in mortgage origination volumes in the third quarter. Moreover, yield-curve flattening and rising interest rates have significantly compressed margins for loan originators.
Amid these, affordability hurdles and higher borrowing costs have kept home buyers on the sidelines. Also, amid rising interest rates, few borrowers are likely to have taken the opportunity to refinance, and opted to hold onto lower rates of their existing mortgages. These factors might have reduced refinancing loans originated by the company.
Hence, there is lack of any solid catalyst prior to the third-quarter earnings release. As such, the Zacks Consensus Estimate of EPS for the to-be-reported quarter remained unchanged at 56 cents, over the past month. The figure also reflects a year-over-year decline of 12.5%.
Earnings Whispers
Our proven model does not conclusively show that New Residential is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earning ESP: New Residential’s Earnings ESP is -2.7%.
Zacks Rank: The company currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.
Stocks That Warrant a Look
While the other players in this space are lined up to report financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.
Granite Point Mortgage Trust Inc. (GPMT - Free Report) , slated to report third-quarter results on Nov 5, has an Earnings ESP of +1.7% and holds a Zacks Rank of 2.
Hannon Armstrong Sustainable Infrastructure Capital, Inc (HASI - Free Report) , set to release Sep-end quarter figures on Nov 7, has an Earnings ESP of +7.69% and a Zacks Rank of 3.
Two Harbors Investments Corp (TWO - Free Report) , scheduled to report quarterly numbers on Nov 6, has an Earnings ESP of +0.7% and carries a Zacks Rank of 3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>