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Rithm Capital (RITM) Shares Dip 0.5% Despite Q2 Earnings Beat
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Shares of Rithm Capital Corp. (RITM - Free Report) have dipped 0.5% since it reported second-quarter 2023 results on Aug 2, 2023. The quarterly results were hurt by feeble contributions from the Origination and Servicing segments. Nevertheless, the upside was partly offset by improved interest income, continuous acquisition of consumer loans and a declining overall expense level.
RITM reported second-quarter 2023 adjusted earnings of 62 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 82.4%. The bottom line has doubled year over year.
Revenues amounted to $1,038.2 million, which tumbled 21.4% year over year in the quarter under review. Yet, the top line beat the consensus mark by 19.5%.
Rithm Capital Corp. Price, Consensus and EPS Surprise
Net servicing revenues of Rithm Capital plunged 39.4% year over year to $487.6 million in the second quarter. Interest income of $398.8 million soared 88.4% year over year and came higher than the Zacks Consensus Estimate of $332 million.
Gain on originated residential mortgage loans, held-for-sale, net amounted to $151.8 million in the quarter under review. The figure fell 50.2% year over year but matched our estimate.
Total expenses declined 38.4% year over year to $700.3 million on the back of lower compensation and benefits expense.
RITM reported a pretax income of $443.2 million in the second quarter, which increased more than four-fold year over year. Net income increased nearly 12-fold year over year to $386.7 million.
Segmental Update
Origination
The segment recorded interest income of $26.6 million in the second quarter, which dropped 42.5% year over year. Total revenues plunged 53.9% year over year to $160.7 million. The unit incurred a pre-tax loss of $10.9 million, narrower than the prior-year quarter’s loss of $26.4 million.
Servicing
Net servicing revenues of $405.6 million tumbled 41.2% year over year in the quarter under review. The segment’s revenues fell 28.2% year over year to $518.5 million. Pre-tax income of $337.8 million decreased 41.6% year over year.
MSR Related Investments
The segment’s revenues slid 6.7% year over year to $117.6 million in the second quarter. Pre-tax income came in at $56.7 million, which climbed 36.5% year over year.
Residential Securities, Properties and Loans
Interest income totaled $148.8 million in the segment, which surged 92.6% year over year. Revenues more than doubled year over year to $156.3 million in the quarter under review. Pre-tax income of $74.5 million compared favorably against the prior-year quarter’s loss of $70.7 million.
Consumer Loans
The segment reported revenues of $24.4 million in the second quarter, which improved 34.7% year over year. Pre-tax income declined 16.2% year over year to $18.8 million.
Mortgage Loans Receivable
Revenues soared 60% year over year to $58.8 million. The unit reported a pre-tax income of $27.2 million, which increased more than four-fold year over year in the quarter under review.
Corporate
Revenues plunged 62.9% year over year to $1.9 million in the second quarter.
Financial Update (as of Jun 30, 2023)
Rithm Capital exited the second quarter with cash and cash equivalents of $1,369 million, which increased 2.4% from the figure at 2022 end. Total assets of $33,858.1 million grew 4.2% from the 2022-end level.
Debt amounted to $23,618.4 million, which increased 7.8% from the figure as of Dec 31, 2022.
Total equity of $7194.7 million improved 2.6% from the 2022-end figure.
In the first half of 2023, RITM generated cash flow from operations of $1,232.2 million, which declined more than four-fold from the prior-year comparable period.
Book value per share came in at $12.16 in the second quarter, which dipped 1% year over year.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. Management also paid out a quarterly common dividend of 25 cents per share.
3Q23 Outlook
Funded origination volume in the origination and servicing operations of RITM is anticipated to be $8-$10 billion in the third quarter of 2023.
Zacks Rank
Rithm Capital currently has a Zacks Rank #4 (Sell).
Of the other Finance sector players that have reported second-quarter results so far, the bottom-line results of Synchrony Financial (SYF - Free Report) , American Express Company (AXP - Free Report) and Morgan Stanley (MS - Free Report) beat the Zacks Consensus Estimate.
Synchrony Financial reported second-quarter 2023 adjusted earnings per share of $1.32, which beat the Zacks Consensus Estimate of adjusted earnings of $1.22 per share. However, the bottom line plunged 17.5% year over year. Net interest income of SYF improved 8.4% year over year to $4,120 million, beating the consensus mark by 0.6%. Other income of Synchrony Financial amounted to $61 million, which dropped 69.2% year over year in the second quarter. Total loan receivables grew 14.7% year over year to $94.8 billion. The purchase volume advanced 0.1% year over year to $47,276 million in the second quarter.
American Express reported second-quarter 2023 earnings per share of $2.89, beating the Zacks Consensus Estimate by 3.2%. The bottom line increased 12.5% year over year. For the quarter under review, AXP’s total revenues, net of interest expense, increased 12.4% year over year to $15,054 million. However, the top line missed the consensus estimate by 2.3%. Network volumes jumped 8% year over year to $426.6 billion in the second quarter. Total interest income was $4,775 million in the second quarter, up 71% year over year. The International Card Services segment recorded a pre-tax income of $253 million, up 38% from a year ago.
Morgan Stanley’s second-quarter 2023 earnings of $1.24 per share surpassed the Zacks Consensus Estimate of earnings of $1.14 per share. However, the bottom line reflects a decline of 11% from the year-ago quarter. Net revenues were $13.46 billion, up 2% from the prior-year quarter. The top line beat the consensus estimate of $12.76 billion. While equity and fixed income underwriting fees increased 52% and 21%, respectively, from the prior-year quarter, advisory fees declined 24%. Therefore, total investment banking fees increased only marginally from the prior-year quarter. Fixed-income trading revenues of MS decreased 31% and equity trading income declined 14% year over year.
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Rithm Capital (RITM) Shares Dip 0.5% Despite Q2 Earnings Beat
Shares of Rithm Capital Corp. (RITM - Free Report) have dipped 0.5% since it reported second-quarter 2023 results on Aug 2, 2023. The quarterly results were hurt by feeble contributions from the Origination and Servicing segments. Nevertheless, the upside was partly offset by improved interest income, continuous acquisition of consumer loans and a declining overall expense level.
RITM reported second-quarter 2023 adjusted earnings of 62 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 82.4%. The bottom line has doubled year over year.
Revenues amounted to $1,038.2 million, which tumbled 21.4% year over year in the quarter under review. Yet, the top line beat the consensus mark by 19.5%.
Rithm Capital Corp. Price, Consensus and EPS Surprise
Rithm Capital Corp. price-consensus-eps-surprise-chart | Rithm Capital Corp. Quote
Q2 Operations
Net servicing revenues of Rithm Capital plunged 39.4% year over year to $487.6 million in the second quarter. Interest income of $398.8 million soared 88.4% year over year and came higher than the Zacks Consensus Estimate of $332 million.
Gain on originated residential mortgage loans, held-for-sale, net amounted to $151.8 million in the quarter under review. The figure fell 50.2% year over year but matched our estimate.
Total expenses declined 38.4% year over year to $700.3 million on the back of lower compensation and benefits expense.
RITM reported a pretax income of $443.2 million in the second quarter, which increased more than four-fold year over year. Net income increased nearly 12-fold year over year to $386.7 million.
Segmental Update
Origination
The segment recorded interest income of $26.6 million in the second quarter, which dropped 42.5% year over year. Total revenues plunged 53.9% year over year to $160.7 million. The unit incurred a pre-tax loss of $10.9 million, narrower than the prior-year quarter’s loss of $26.4 million.
Servicing
Net servicing revenues of $405.6 million tumbled 41.2% year over year in the quarter under review. The segment’s revenues fell 28.2% year over year to $518.5 million. Pre-tax income of $337.8 million decreased 41.6% year over year.
MSR Related Investments
The segment’s revenues slid 6.7% year over year to $117.6 million in the second quarter. Pre-tax income came in at $56.7 million, which climbed 36.5% year over year.
Residential Securities, Properties and Loans
Interest income totaled $148.8 million in the segment, which surged 92.6% year over year. Revenues more than doubled year over year to $156.3 million in the quarter under review. Pre-tax income of $74.5 million compared favorably against the prior-year quarter’s loss of $70.7 million.
Consumer Loans
The segment reported revenues of $24.4 million in the second quarter, which improved 34.7% year over year. Pre-tax income declined 16.2% year over year to $18.8 million.
Mortgage Loans Receivable
Revenues soared 60% year over year to $58.8 million. The unit reported a pre-tax income of $27.2 million, which increased more than four-fold year over year in the quarter under review.
Corporate
Revenues plunged 62.9% year over year to $1.9 million in the second quarter.
Financial Update (as of Jun 30, 2023)
Rithm Capital exited the second quarter with cash and cash equivalents of $1,369 million, which increased 2.4% from the figure at 2022 end. Total assets of $33,858.1 million grew 4.2% from the 2022-end level.
Debt amounted to $23,618.4 million, which increased 7.8% from the figure as of Dec 31, 2022.
Total equity of $7194.7 million improved 2.6% from the 2022-end figure.
In the first half of 2023, RITM generated cash flow from operations of $1,232.2 million, which declined more than four-fold from the prior-year comparable period.
Book value per share came in at $12.16 in the second quarter, which dipped 1% year over year.
Capital-Deployment Update
Rithm Capital did not buy back any shares in the reported quarter. Management also paid out a quarterly common dividend of 25 cents per share.
3Q23 Outlook
Funded origination volume in the origination and servicing operations of RITM is anticipated to be $8-$10 billion in the third quarter of 2023.
Zacks Rank
Rithm Capital currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Sector Releases
Of the other Finance sector players that have reported second-quarter results so far, the bottom-line results of Synchrony Financial (SYF - Free Report) , American Express Company (AXP - Free Report) and Morgan Stanley (MS - Free Report) beat the Zacks Consensus Estimate.
Synchrony Financial reported second-quarter 2023 adjusted earnings per share of $1.32, which beat the Zacks Consensus Estimate of adjusted earnings of $1.22 per share. However, the bottom line plunged 17.5% year over year. Net interest income of SYF improved 8.4% year over year to $4,120 million, beating the consensus mark by 0.6%. Other income of Synchrony Financial amounted to $61 million, which dropped 69.2% year over year in the second quarter. Total loan receivables grew 14.7% year over year to $94.8 billion. The purchase volume advanced 0.1% year over year to $47,276 million in the second quarter.
American Express reported second-quarter 2023 earnings per share of $2.89, beating the Zacks Consensus Estimate by 3.2%. The bottom line increased 12.5% year over year. For the quarter under review, AXP’s total revenues, net of interest expense, increased 12.4% year over year to $15,054 million. However, the top line missed the consensus estimate by 2.3%. Network volumes jumped 8% year over year to $426.6 billion in the second quarter. Total interest income was $4,775 million in the second quarter, up 71% year over year. The International Card Services segment recorded a pre-tax income of $253 million, up 38% from a year ago.
Morgan Stanley’s second-quarter 2023 earnings of $1.24 per share surpassed the Zacks Consensus Estimate of earnings of $1.14 per share. However, the bottom line reflects a decline of 11% from the year-ago quarter. Net revenues were $13.46 billion, up 2% from the prior-year quarter. The top line beat the consensus estimate of $12.76 billion. While equity and fixed income underwriting fees increased 52% and 21%, respectively, from the prior-year quarter, advisory fees declined 24%. Therefore, total investment banking fees increased only marginally from the prior-year quarter. Fixed-income trading revenues of MS decreased 31% and equity trading income declined 14% year over year.