Dj Dir Zucker Sells 200 Of Houlihan Lokey Inc >Hli

Shares of Rithm Capital Corp. RITM have gained 3.3% since it reported better-than-expected third-quarter 2024 earnings on Oct. 29, 2024, driven by an improving performance in its Mortgage Loans Receivable business and solid Asset Management unit.

Higher interest income was a key contributor to third-quarter growth, though rising expenses and declining servicing revenues partially offset these gains. Still, Rithm’s expanding Newrez business and strategic initiatives are expected to boost the market share of its origination platform, presenting significant growth opportunities for investors.

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Now, let’s take a look at how RITM performed in the third quarter.

RITM’s Q3 Performance

RITM reported third-quarter 2024 adjusted earnings of 54 cents per share, which outpaced the Zacks Consensus Estimate of 43 cents. However, the bottom line fell 6.9% year over year.

Revenues amounted to almost $619.5 million, which plunged 45.4% year over year in the quarter under review. The top line also missed the consensus mark by 44.4%.

Rithm Capital Corp. Price, Consensus and EPS Surprise

Rithm Capital Corp. price-consensus-eps-surprise-chart | Rithm Capital Corp. Quote

Let’s delve deeper.

Net servicing revenues of Rithm Capital were negative $254.2 million, which deteriorated 154.9% year over year in the third quarter and missed the Zacks Consensus Estimate by 180.8% due to changes to the fair value of the MSR portfolio.Interest income increased 19.1% year over year to $550.7 million and beat the consensus mark by 12.9%.

Gain on originated residential mortgage loans, held for sale, net, rose 23.8% year over year to $184.7 million and beat the consensus estimate by 9.9%. Asset management revenues of $81 million missed the Zacks Consensus Estimate by 4.7%.

Total expenses of $983.9 million increased 30.4% year over year in the quarter under review due to higher interest expenses and warehouse line fees, G&A expenses and compensation and benefits.

RITM’s pretax income fell to $45.1 million in the third quarter from $273.8 million a year ago.

Q3 Segmental Update

Origination and Servicing: Net servicing revenues amounted to negative $241 million, declining from $468.5 million in the prior-year quarter. The segment’s interest income of $211.6 million rose from $156.6 million a year ago. The segment’s revenues of $142.3 million fell from $769.2 million year over year. Pre-tax loss came in at $312.3 million against pre-tax income of $412.5 million a year ago.

Investment Portfolio: The segment’s net servicing revenues of negative $13.1 million deteriorated from negative $5.1 million in the year-ago quarter. Interest income was $267.6 million, up from $255.8 million a year ago. Total revenues increased to $324.6 million from $316 million a year ago. Pre-tax earnings came in at $361.3 million, improving from a loss of $108.3 million in the prior quarter.

Mortgage Loans Receivable: Revenues of $66.3 million advanced from $50.1 million. The unit’s pre-tax income was $35.1 million compared with $19 million in the prior-year quarter.

Asset Management: Total revenues came in at $86.3 million in the third quarter of 2024. Pre-tax income was $6 million in the quarter under review.

Financial Update (as of Sept. 30, 2024)

Rithm Capital exited the third quarter with cash and cash equivalents of $1.64 billion, which increased from the 2023-end level of $1.29 billion. Total assets of $42.28 billion rose from $39.72 billion at 2023-end.

Unsecured notes, net of issuance costs,amounted to $1.2 billion, up from around $719 million at 2023-end.

Total equity of $7.75 billion increased from $7.1 billion at 2023-end.

Net cash used in operations was $431.8 million in the first nine months of 2024 against net cash from operations of $1.74 billion a year ago.

Capital-Deployment Update

Rithm Capital did not buy back any shares in the first nine months of 2024. It has a share repurchase program of $200 million common stock in place through Dec. 31, 2024. Management paid out a quarterly common dividend of 25 cents per share, totaling $129.9 million.

Zacks Rank & Other Key Picks

Rithm Capital currently has a Zacks Rank #2 (Buy).

Investors interested in the broader Finance space may look at some other top-ranked players like Jackson Financial Inc. JXN, WisdomTree, Inc. WT and Houlihan Lokey, Inc. HLI. While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and Houlihan Lokey carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.85 per share, which indicates 46.8% year-over-year growth. It witnessed one upward estimate revision in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 118.5% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 75.7% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates thrice in the past four quarters and met once, with an average surprise of 7.3%.

The Zacks Consensus Estimate for Houlihan Lokey’s current-year earnings suggests a 29% year-over-year increase. During the past month, HLIhas witnessed two upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues is pegged at $2.3 million, indicating a 19.6% increase from a year ago.

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