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On Friday, RBC Capital maintained its positive stance on shares of Rithm Capital Corp. (NYSE:RITM), reiterating an Outperform rating and a price target of $13.00. According to InvestingPro data, analyst targets range from $12 to $14, with three analysts recently revising their earnings expectations upward for the upcoming period.
The firm highlighted Rithm Capital's ongoing transformation into an alternative investment manager, emphasizing a shift towards a fee-based, capital-light business model. The potential spinoff or listing of the Newrez business was mentioned as a possible event for 2025, contingent on its alignment with management's strategy.
RBC Capital underscored the favorable conditions created by elevated interest rates for mortgage servicing and its associated cash flows. The analyst pointed to Rithm Capital's book value per share (BVPS), which may exhibit resilience against the widening of mortgage spreads.
The company trades at 0.87 times book value and maintains a notable 9.37% dividend yield, having consistently paid dividends for 12 consecutive years. Get deeper insights into RITM's financial health and more exclusive metrics with InvestingPro. The company's unique position in originating assets and its strategic capital allocation across various strategies were also noted as factors supporting the Outperform rating.
The company's ability to generate revenue streams through its third-party fund management business was recognized as a significant aspect of its growth. This pivot to what is referred to as "RITM 2.0" is expected to gradually increase fee revenues. The recent acquisition of the Sculptor business was highlighted as a move that accelerates Rithm Capital's transition towards its new business model.
RBC Capital's outlook for Rithm Capital is based on several key attributes, including the company's differentiated ability to originate assets and allocate capital effectively. The analyst's commentary reflects confidence in Rithm Capital's strategic direction and its potential to enhance shareholder value through its evolving business approach.
InvestingPro analysis suggests the stock is currently undervalued, with additional ProTips and comprehensive research available to subscribers, including detailed insights into the company's financial health score of 2.18 (FAIR) and extensive peer comparison tools.
In other recent news, Rithm Capital reported a robust performance in the third quarter of 2024, with a GAAP net income of $97 million and earnings available for distribution of $270 million. The company raised $300 million in equity to support growth initiatives, including mergers and acquisitions. It also announced the successful acquisition of Genesis Capital and Sculptor, contributing to the company's growth trajectory.
Rithm Capital, which manages $80 billion in assets and an $875 billion mortgage servicing portfolio, has deployed $5.8 billion since 2021. The company is exploring strategic partnerships in real estate and evaluating investment strategies based on current market conditions.
B.Riley's analyst maintains a Buy rating on Rithm Capital, citing disciplined growth and strategic initiatives likely to benefit shareholders. The company is expected to maintain its quarterly dividend of $0.25 per share. There are also ongoing discussions about a potential public listing for Newrez, anticipated in 2025, with a current book value of approximately $12.5.
Despite indications of increased delinquencies in the broader consumer credit landscape, Rithm Capital maintains a robust focus on growth through strategic asset acquisitions. These developments highlight the company's recent performance and strategic initiatives.
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