Shares of Rithm Capital Corp. (RITM Quick QuoteRITM - Free Report) have declined 3.2% since it reported better-than-expected second-quarter 2024 results on Jul 31, 2024, before the opening bell. The quarterly results were supported by an improving performance in its Mortgage Loans Receivable business and solid Asset Management unit.

Growth in interest income was a major tailwind in the second quarter. However, rising expenses partially offset the positives. Investors seem to be concerned about its declining servicing revenues, which is likely to have led to the share price decline. Nevertheless, the company’s growing strength in the Newrez business and strategic actions will increase the market share of its origination platform in the coming days, which can provide investors with massive growth opportunities.

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

Q2 Performance

RITM reported second-quarter 2024 adjusted earnings of 47 cents per share, which outpaced the Zacks Consensus Estimate of 42 cents. However, the bottom line fell 24.2% year over year.

Revenues amounted to almost $1.2 billion, which jumped 10.7% year over year in the quarter under review. The top line also beat the consensus mark by 8.8%.

Let’s delve deeper.

Net servicing revenues of Rithm Capital amounted to $431.1 million, which fell 11.6% year over year in the second quarter but beat the Zacks Consensus Estimate by 16.1%. Interest income increased 24.3% year over year to $478.7 million but missed the consensus mark by 2.9%.

Gain on originated residential mortgage loans, held for sale, net, fell 13.9% year over year to $153.7 million but beat the consensus estimate by 4.1%. Asset management revenues of $109.4 million beat the Zacks Consensus Estimate by 45.9%.

Total expenses of $943.5 million increased 35.6% 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 $290.2 million in the second quarter from $443.2 million a year ago.

Segmental Update

Origination and Servicing: Net servicing revenues amounted to $314.6 million, declining from $405.6 million in the prior-year quarter. The segment’s interest income of $178.4 million rose from $129.2 million a year ago. The segment’s revenues of $648.8 million fell from $679.2 million year over year. Pre-tax income came in at $247.7 million, down from $326.9 million a year ago.

Investment Portfolio: The segment’s net servicing revenues of $116.5 million jumped from $81.8 million in the year-ago quarter. Interest income was at $235.7 million, up from $206.3 million a year ago. Total revenues increased to $406.6 million from $381.6 million a year ago. Pre-tax earnings came in at $37.3 million, declining from $134.3 million in the prior quarter.

Mortgage Loans Receivable: Revenues of $59.6 million advanced from $49.6 million. The unit’s pre-tax income came in at $31.7 million compared with $27.2 million in the prior-year quarter.

Asset Management: Total revenues came in at $114.4 million in the second quarter of 2024. Pre-tax income was at $33.8 million in the quarter under review.

Financial Update (as of Jun 30, 2024)

Rithm Capital exited the second quarter with cash and cash equivalents of $1.24 billion, which decreased from the 2023-end level of $1.29 billion. Total assets of $42.02 billion rose from $39.72 billion at 2023-end.

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

Total equity of $7.4 billion increased from $7.1 billion at 2023-end.

Net cash used in operations was at $1.2 billion in the first half of 2024 against net cash from operations of $1.2 billion a year ago.

Capital-Deployment Update

Rithm Capital did not buy back any shares in the first half of 2024. It had a share repurchase program of $200 million of common stock in place through Dec 31, 2024. Management paid out a quarterly common dividend of 25 cents per share, totaling $122.4 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 Quick QuoteJXN - Free Report) , WisdomTree, Inc. (WT Quick QuoteWT - Free Report) and HIVE Digital Technologies Ltd. (HIVE Quick QuoteHIVE - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital 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 $17.89 per share, which indicates 39.3% 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 116% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 64.9% 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 twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 34.6% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $127.2 million, indicating an 11.1% increase from a year ago.