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On Thursday, Piper Sandler reaffirmed its Overweight rating on Rithm Capital Corp. (NYSE: RITM) with a steady price target of $14.00. The firm’s analysis highlighted Rithm’s resilience in a fluctuating interest rate environment and its focus on mortgage servicing through its subsidiary Newrez. According to InvestingPro data, five analysts have recently revised their earnings estimates upward for the upcoming period, with the company commanding a market capitalization of $5.9 billion. Piper Sandler’s endorsement comes amid recent dramatic shifts in the 10-year yield, which saw a peak of 4.81% in mid-January before falling to 3.86% around early April, and then rising again to approximately 4.5%.
The mortgage market has felt the impact of these rate changes, with the 30-year mortgage rate hovering around 6.85%. Piper Sandler noted that this high rate poses challenges to a significant increase in mortgage volumes. The firm also pointed out the uncertainty in the mortgage rate outlook due to factors such as tariff uncertainty, the tax bill, deficit concerns, and potential government-sponsored enterprise (GSE) reform.
Despite these challenges, Piper Sandler sees Rithm Capital as well-positioned to navigate the market, citing the company’s status as the third-largest mortgage servicer in the United States. The firm expects Rithm to generate robust returns on equity in the mid-to-high teens, thanks in part to the relative advantage of servicing in the current rate environment. InvestingPro analysis reveals the company’s strong financial performance, with revenue growing 10.49% and maintaining dividend payments for 13 consecutive years, currently offering an attractive 8.97% yield.
Furthermore, Rithm Capital is actively exploring opportunities to enhance shareholder value. One such potential catalyst is the proposed spin-off of its mortgage business, Newrez. The company is also looking to expand its presence in asset management. These strategic moves are noted as reasons for the stock’s potential re-rating, especially given that it is currently trading at 9.2 times earnings and at a 10% discount to book value. Piper Sandler’s analysis suggests that Rithm’s servicing focus and upcoming initiatives could lead to a positive reassessment of the stock’s value in the market. InvestingPro analysis indicates the stock is currently undervalued, with additional exclusive insights and detailed valuation metrics available in the comprehensive Pro Research Report, one of 1,400+ deep-dive analyses available to subscribers.
In other recent news, Rithm Capital Corp. reported its first-quarter earnings for 2025, with earnings per share reaching $0.52, surpassing the forecasted $0.47, although its revenue of $768.38 million fell short of the anticipated $1.24 billion. Piper Sandler upgraded Rithm Capital’s stock rating from Neutral to Overweight, raising the price target to $14.00, citing strong servicing fee income and a 17% core return on equity as key factors. During the company’s 2025 Annual Meeting of Stockholders, shareholders elected two Class III directors and ratified Ernst & Young LLP as the independent registered public accounting firm for the fiscal year. Additionally, stockholders approved the compensation of the company’s named executive officers. Piper Sandler also noted that Rithm Capital is trading at a discount to its book value, suggesting potential for significant returns. The firm highlighted Rithm’s diversified business model, including plans to expand its asset management segment, as a strength. These developments indicate a positive outlook for Rithm Capital, with analysts predicting continued high returns.
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