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On Tuesday, B.Riley maintained its Buy rating and $14.00 price target for Rithm Capital Corp. (NYSE: RITM) stock after the company reported second-quarter results.
The firm adjusted its core earnings per share (EPS) estimate for 2024 from $1.84 to $1.88, citing the quarter's performance. The estimates for 2025 and 2026 remain at $1.96 and $2.15 respectively.
The analyst highlighted Rithm Capital's 3.7% economic return during the quarter, emphasizing the strength and resilience of the company's business model. Such performance supports the expectation that Rithm Capital will continue to experience one of the highest growth rates in its sector.
The successful acquisition of Specialized Loan Servicing and the management agreement with Great Ajax (NYSE:AJX) were also noted as evidence of the company's dynamic growth trajectory.
Rithm Capital's core mortgage company, Newrez, was recognized for delivering strong results in both origination and servicing, contributing to the company's robust earnings narrative.
The analyst pointed out several factors that underpin the earnings outlook, including a significant mortgage servicing rights (MSR) portfolio valued at $741.6 billion, opportunities in the commercial real estate market through GreenBarn and Great Ajax, and Newrez's position as an industry leader emerging from a cyclical trough.
Furthermore, the company's liquidity of $1.5 billion was mentioned as a key asset enabling near-term execution of its business strategies. The analyst also encouraged investors to consider the potential value creation from the company's ongoing corporate restructuring.
Management's sum-of-the-parts (SOTP) valuation was compared to previous analyses, suggesting that as Rithm Capital's various business segments become stand-alone entities, there could be a significant re-rating of the stock, potentially reaching into the $20/share range.
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