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On Monday, Keefe, Bruyette & Woods adjusted their financial outlook for Rocket Companies Inc. (NYSE: RKT), increasing the price target to $12.00 from the previous $10.50. Despite the higher price target, the firm has maintained an Underperform rating on the stock.
Analysts at Keefe, Bruyette & Woods have revised their earnings per share (EPS) estimates for the years 2025, 2026, and 2027 to $0.40, $0.81, and $1.20, respectively. This update follows the incorporation of the first quarter guide, anticipated higher forward other income, and a projection of slightly lower margins.
The revision in EPS estimates comes after Rocket Companies reported strong results for the fourth quarter. The growth in other income, particularly from Rocket Money, was noted as a positive development by the analysts. However, they expressed caution regarding the company’s future, pointing to the potential risks associated with sustained high mortgage rates and uncertain improvements in refinance volumes through 2027.
The analysts believe that the current share price of Rocket Companies may be overestimating the speed at which a recovery in volume might occur, relative to industry estimates. They suggest that the risk/reward balance for the stock is negatively skewed and see potential downside for the shares under the scenario where mortgage rates stay elevated.
In light of these considerations, Keefe, Bruyette & Woods stands by their Underperform rating for Rocket Companies. Nonetheless, they have adjusted their price target to $12, which reflects 11 times a discounted version of their estimated 2027 earnings.
In other recent news, Rocket Companies Inc. reported robust fourth-quarter 2024 earnings, surpassing Wall Street expectations. The company achieved an earnings per share (EPS) of $0.04, exceeding the forecast of $0.03, while revenue reached $1.19 billion, surpassing the anticipated $1.16 billion. This performance marks a year-over-year revenue increase of 34%, with significant growth in net rate lock volume. Rocket Companies’ full-year adjusted revenue stood at $4.9 billion, reflecting a 30% increase from the previous year. Additionally, the gain on sale margin improved to 295 basis points.
In other developments, Rocket Companies is optimistic about its 2025 outlook, projecting adjusted revenue between $1.175 billion and $1.325 billion for the first quarter, indicating a potential 7% year-over-year growth at the midpoint. The company aims for a $150 billion origination volume while maintaining flat fixed costs. Analyst firm Morgan Stanley (NYSE:MS) noted that Rocket Companies demonstrated resilience and strength in its strategic direction.
Furthermore, Rocket Companies continues to focus on leveraging technology, with CEO Varun Krishna highlighting the role of AI in enhancing efficiency and client service. The company has also introduced new initiatives like the Rocket Rent Rewards program to make homeownership more accessible. These recent developments underscore Rocket Companies’ commitment to growth and innovation in a competitive market.
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