Company Reports

Narrow-moat-rated Rocket reported decent first-quarter earnings that were better than we had expected, though its results remained pressured by a weak mortgage market. Adjusted net revenue increased 31.9% from last year to $1.16 billion, while adjusted earnings per share increased to $0.04 from a loss of $0.06 last year. While these results were better than we had anticipated, a more meaningful recovery for Rocket will require better mortgage origination conditions, the timing of which remains uncertain. As we incorporate these results, we do not plan to materially alter our $13.50 fair value estimate, and shares trade in fairly valued territory.

The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digital lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments, along with its control over the appraisal and titling process through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat-rated Rocket Companies reported better fourth-quarter results than we had expected, though the company continues to be affected by difficult mortgage market conditions industrywide. Revenue increased 44% from last year to $694 million, or $885 million when adjusted for a negative $191 million valuation change for the company’s mortgage servicing rights portfolio. Despite the recovery in revenue, the company still reported a net adjusted loss of $6 million, though this is a significant improvement from the $197 million loss 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 value, though we caution investors that near-term results will likely remain weak until mortgage market conditions improve.

Narrow-moat-rated Rocket Companies reported decent third-quarter earnings that were in line with our expectations as the company continues to be affected by weak mortgage conditions industrywide. Adjusted net revenue increased 12.8% from last year but was effectively flat sequentially at $1 billion. The company continues to benefit from its cost-cutting efforts, with the company flipping to an adjusted net gain of $7 million from a loss of $166 million last year. As we incorporate these results, we do not expect to materially alter our $13 per share fair value estimate. We see the shares as undervalued on a full-cycle basis, but near-term results will remain weak until mortgage rates fall, given that Rocket is so highly leveraged to the mortgage cycle.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digital lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments, along with its control over the appraisal and titling process through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat-rated Rocket Companies reported decent second-quarter earnings, which came in better than our low expectations, even as the firm is pressured by weak mortgage conditions industrywide. Rocket's top- and bottom-line results benefited from a positive $235 million fair value adjustment to the firm's mortgage servicing assets, which get treated as revenue. Excluding this, adjusted revenue fell 11% year over year, but increased 13.5% from last quarter, to $1 billion. Meanwhile, adjusted net losses decreased more than 50% from last year to $33 million. As we incorporate these results, we do not expect to materially alter our $13 per share fair value estimate. We see the shares as undervalued on a full-cycle basis, but near-term results will remain weak until mortgage rates fall, given that Rocket is so highly leveraged to the mortgage cycle.

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.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digital lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments, along with its control over the appraisal and titling process through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat-rated Rocket Companies reported weak results that were in line with our expectations as a difficult mortgage market continues to be a major headwind to the firm. Rocket’s adjusted net revenue fell 72% from last year and 23% from last quarter to $683 million. The company fell out of profitability during the quarter, reporting a net loss per share of $0.14 compared with a gain of $0.32 last year, inclusive of a negative $202 million adjustment on the value of the company’s mortgage servicing rights asset book. As we incorporate these results, we do not plan to materially alter our $13 per share 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 due to its relative strength in the more volatile refinance market and its results will remain poor until market conditions improve.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat-rated Rocket Companies reported another weak quarter as the company faced new lows for mortgage origination volume industrywide, due primarily to rapidly increasing mortgage rates, which have risen above 7%. Rocket reported net revenue of $1.3 billion, which was 58.5% below last year's results and 7% below last quarter's results. Earnings per share was $0.04 compared with $0.54 last year. Without a $400 million positive valuation adjustment on the company’s mortgage servicing assets for the third quarter, Rocket would have reported a loss.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

As we had expected, narrow-moat-rated Rocket Companies reported weak results as low mortgage origination volume industrywide, a consequence of rising mortgage rates and housing affordability issues, pressured revenue and earnings. Rocket’s revenue fell 48% from last year to $1.39 billion. Earnings per share fell even further, falling 94% year over year to $60 million, as the decline in revenue outpaced Rocket’s cost-cutting efforts.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat Rocket saw another sequential decline in net revenue and income as the impact of rising mortgage rates continues to filter through its business. Adjusted net revenue (excluding a $739 million positive adjustment to the value of its mortgage servicing assets) fell 52% from last year to $1.9 billion. This decrease drove adjusted net income to $293 million from $637 million in the prior quarter. Rocket’s results are being impacted by a sharp increase in mortgage rates, which have risen from below 3% at the end of 2021 to mid-5% currently. This has led to far lower levels of refinance activity, which are a strength of Rocket’s, and will likely add pressure to purchase loan volumes industrywide.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat Rocket Companies reported solid fourth-quarter results that were largely in line with our expectations. Earnings per share of $.32 shrank 70.6% from the prior-year quarter. Revenue fell 16.8% from last quarter and 49% year over year to $2.6 billion. As a reminder, late 2020 is a difficult comparison as the combination of high demand for mortgage securities and heavy refinance activity drove origination volume and mortgage gain on sale margins to cyclical highs industrywide.

While Rocket Companies offers a variety of products and services, the firm is best known for its Rocket Mortgage segment, which provides Rocket with most of its revenue. The mortgage industry is fractured and highly competitive, but Rocket has distinguished itself by operating as an entirely digitally lender, originating and servicing its mortgages through its mobile app and website. Rocket has made substantial investments in automating the mortgage process and has been an industry leader in increasing loan processing speed and removing pain points for consumers. These investments along with its control over the appraisal and titling process, through its ownership of Amrock, have allowed the firm to offer an industry-leading mortgage experience to borrowers while also enjoying a cost structure advantage over its competitors.

Narrow-moat Rocket announced that it will buy Truebill, which offers its 2.5 million users personal finance management tools, for $1.275 billion in cash. This is a premium price, well above the $530 million implied by Truebill's last capital raise in June, though we do note that the firm has experienced rapid user growth this year. Rocket has plenty of room on its balance sheet to support the deal, ending the third quarter with more than $2.2 billion in cash, and we do not foresee any stress to its financial position as a result.