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Zacks Investment Research
Shares of Rithm Capital Corp. (RITM - Free Report) have risen 12.2% since the company reported strong first-quarter results on April 25. The better-than-expected earnings benefited from growth in core operating businesses. However, the decline in net servicing revenues and higher expenses partially offset the upsides.
RITM reported first-quarter 2025 adjusted earnings of 52 cents per share, which outpaced the Zacks Consensus Estimate by 15.6%. The bottom line rose 8.3% year over year.
Revenues amounted to almost $768.4 million, which decreased 39% year over year in the quarter under review. The top line also missed the consensus mark by 31.8%.
Rithm Capital Corp price, consensus and EPS surprise
RITM’s Q1 performance
Rithm Capital's net servicing revenues were $28.9 million, which declined significantly year over year in the first quarter and missed the Zacks Consensus Estimate by 90.8% due to changes to the fair value of the MSR portfolio. Interest income increased 1.5% year over year to $441.3 million but missed the consensus mark by 16.5%.
Gain on originated residential mortgage loans held for sale, net, rose 12.2% year over year to $159.8 million and missed the consensus estimate by 8.4%. However, asset management revenues of $87.7 million surpassed the Zacks Consensus Estimate of $80.9 million.
Total expenses of $928.1 million increased 9.1% year over year in the quarter under review due to higher interest expenses and warehouse line fees, other segment expenses, and compensation and benefits.
RITM’s pretax income was $56.8 million in the first quarter, which declined from $380.9 million in the prior year. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)
RITM’s Q1 segmental update
Origination and Servicing: Net servicing revenues amounted to $28.9 million, which decreased from $554.1 million in the prior-year quarter. The segment’s interest income of $292.6 million rose from $275.2 million in the previous year. The segment’s revenues of $498.7 million decreased from $1 billion year over year. Pre-tax income came in at $90 million, down from $366.3 million in the prior year.
Investment Portfolio: Interest income was $71.8 million, down from $90 million a year ago. Total revenues decreased to $105.1 million from $112.5 million in the prior year. Pre-tax income was $18 million, which declined from $26.4 million in the prior quarter.
Residential Transitional Lending: Revenues of $66.5 million increased from $64.7 million. The unit’s pre-tax income was $15.9 million, which decreased from $41.1 million in the prior-year quarter.
Asset Management: Total revenues were $97.1 million, which rose from $75.9 million in the prior-year quarter. Pre-tax loss was $19.8 million, narrower than $29.7 million in the prior year.
RITM’s financial update (as of March 31, 2025)
Rithm Capital exited the first quarter with cash and cash equivalents of $1.5 billion, which increased 2.4% from the 2024-end level. Total assets of $45.3 billion declined from $46 billion at 2024-end.
Unsecured notes, net of issuance costs, amounted to $1.2 billion, up 0.3% from the figure at 2024-end.
Total equity of $7.9 billion came in line with the figure at 2024-end.
Net cash provided by operations was $1.4 billion in the first quarter of 2025 compared to net cash used in operations of $1.3 billion in the previous year.
RITM’s capital deployment update
Rithm Capital did not buy back shares in the first quarter of 2025. Management paid out a quarterly common dividend of 25 cents per share, totaling $132.5 million.
RITM’s Zacks rank and other key picks
RITM currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Finance space are Root Inc. (ROOT - Free Report), EverQuote Inc. (EVER - Free Report) and Heritage Insurance Holdings Inc. (HRTG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present.
The Zacks Consensus Estimate for Root’s current-year earnings of $1.11 per share has witnessed one upward revision in the past 30 days against none in the opposite direction. Root beat earnings estimates in each of the trailing four quarters, with the average surprise being 208.9%. The consensus estimate for current-year revenues is pegged at $1.4 billion, implying 17.3% year-over-year growth.
The Zacks Consensus Estimate for EverQuote’s current-year earnings is pegged at $1.17 per share. EverQuote beat earnings estimates in each of the trailing four quarters, with the average surprise being 122.6%. The consensus estimate for current-year revenues is pegged at $640.3 million, suggesting 28% year-over-year growth.
The Zacks Consensus Estimate for Heritage Insurance’s current-year earnings of $3.25 per share has witnessed two upward revisions in the past 30 days against no movement in the opposite direction. Heritage Insurance beat earnings estimates in each of the trailing four quarters, with the average surprise being 363.2%. The consensus estimate for current-year revenues is pegged at $854.9 million, calling for 4.6% year-over-year growth.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed.
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