Rocket Earnings: Mortgage Origination Volume Remains Pressured by High Rates and High Prices

Narrow-moat-rated Rocket reported decent second-quarter earnings that were in line with our expectations, though the firm continues to be pressured by a weak mortgage market. Adjusted net revenue increased 22.6% from last year to $1.2 billion, while adjusted earnings per share increased to $0.06 from a loss of $0.02 last year. Despite the significant year-over-year increase in revenue, a more meaningful recovery for Rocket will require better mortgage origination conditions. As we incorporate these results, we do not plan to materially alter our $13.50 fair value estimate. At the current price, we see the shares as modestly overvalued. That said, Rocket’s business is heavily exposed to the path that interest rates take. If there are signs that rates will fall faster than expected that will have a positive impact on our fair value estimate.