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Rocket Companies Inc (NYSE: RKT) reported Thursday with fourth-quarter results that signal the online mortgage, real estate and e-commerce holding company is "firing on all cylinders," according to BofA Securities.
The Rocket Companies Analyst: Jason Kupferberg maintains a Buy rating on Rocket Companies' stock with an unchanged $27 price target.
The Rocket Companies Thesis: Mortgage companies have come under pressure in recent weeks amid interest rate increases and the potential impact on mortgage volumes and margins, Kupferberg said in a note.
This thesis may have been proven wrong after the company's strong execution in the fourth quarter and a new partnership with Morgan Stanley (NYSE: MS) to originate and service conforming loans from its bank and E*Trade clients, the analyst said.
BofA's five key takeaways from the earnings report are:
1. Revenue of $4.775 billion beat the research firm's estimate of $3.855 billion and the EPS of $1.14 beat estimates of 84 cents per share.
2. Funded originations were $107.2 billion versus estimates of $89.5 billion. The rate lock volume of $95.7 billion also came in ahead of the $85.9 billion expected and management's own guidance of $80 billion to $87 billion. The strong performance likely led to Rocket increasing its market share from 7.5% last quarter to 8.9% in the fourth quarter.
3. The gain on sale margin of 4.41% beat estimates of 4.11%.
4. Direct-to-consumer and partner channels reported $68 billion and $38 billion in funded volume, respectively.
5. Total expenses were higher than expected at $1.81 billion versus $1.665 billion and accounted for 37.9% of adjusted revenues.
Rocket's first-quarter guidance also came in "meaningfully above" expectations and should result in an upward revision cycle, Kupferberg said.
Rocket is modeling for first-quarter closed loan originations of $98 billion to $103 billion versus the consensus estimate of $76 billion.
RKT Price Action: Rocket shares gained 9.8% in Friday's session, closing at $21.85.
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