Rocket Companies Earnings: Low Mortgage Origination Volume Leads to Another Quarter of Losses

Narrow-moat-rated Rocket Companies reported weak earnings as the company remains under pressure from difficult mortgage conditions in the United States as higher interest rates reduce origination volume. Rocket’s adjusted net revenue, which excludes a negative $216 million mortgage servicing right valuation change, fell 54% from last year, but rose 29% from last quarter to $882 million. After falling out of profitability last quarter, Rocket continues to operate at a loss, losing $0.16 per share versus a gain of $0.40 last year. As we incorporate these results, we do not plan to materially alter our $13 fair value estimate for Rocket. We see the shares as undervalued on a full cycle basis, but would emphasize to investors that Rocket is highly leveraged to the mortgage cycle and will likely continue to report poor results until mortgage conditions improve.