Yahoo Finance Rithm Capital (RITM) Up 15% in the Past Year: More Room to Run?
Rithm Capital Corp. RITM shares have gained 15% in the past year. The stock has outperformed the industry’s 10.4% increase. Based in New York, Rithm Capital is an asset manager specializing in the real estate and financial services sectors. It has a market cap of $5.2 billion.
Its asset management business expansion and continuous acquisition of customer loans are aiding the company. Its diversified platform and focus on growing profitability of its Newrez business is buoying its performance. Muted prepayment speeds and low delinquencies also bode well. These factors are collectively contributing to this Zacks Rank #2 (Buy) company's notable price appreciation.
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Can RITM Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for Rithm Capital’s 2024 full-year earnings is pegged at $1.76 per share. The estimate increased by 4 cents over the past sixty days. The company beat earnings estimates in each of the last four quarters, with an average surprise of 53.9%.
The consensus mark for full-year 2024 revenues stands at $4.8 billion, which suggests a 33.2% rise from the prior-year reported number. The high interest rate environment continues to benefit its MSR portfolio.
The Zacks Consensus Estimate for current year interest income predicts a 15.4% increase from a year ago, which will likely support the topline growth. Moreover, the consensus mark for net servicing revenues indicates a 36.1% year-over-year increase in 2024.
Rithm Capital’s evolving business enables the company to maintain its dividend performance. Its dividend yield of 9.3% is significantly higher than the industry average of 2.1%. It paid $120.9 million to its shareholders in the form of dividends in the first quarter. The company expects to increase its scale of alternative investment business and add insurance in the future. It also aims to venture into the retail markets, along with continuing to serve institutional markets.
With alternative asset space gaining popularity, RITM is expected to witness growing demand for its services. The Sculptor acquisition is elevating its asset management business and expanding its capabilities. Sculptor launched its Sculptor Loan Financing Partners platform in a bid to expand its institutional credit strategies. Its deal with fellow REIT Great Ajax suggests that it is heading in the right direction.
Its Newrez business had a return on equity of 23% and continues to aid its performance. Organic growth in Newrez’s third-party servicing franchise and improved market share bode well. The acquisition of Specialized Loan Servicing LLC is expected to add $149 billion of servicing. Its diversified approach helps the company in client growth as well as retention. RITM’s servicing platform is reaping the rewards of scale efficiencies and ongoing technological investments. The company’s AI initiatives are expected to drive further efficiencies in the future.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Rithm Capital exited the first quarter with cash and cash equivalents of $1.14 billion, which decreased from the 2023-end level of $1.29 billion. On the other hand, debt amounted to $29.5 billion, up from the $24 billion figure as of Dec 31, 2023. It has a total debt-to-total capital ratio of 81.2% at the first quarter-end, way above the industry average of 55.9%. It also experienced negative free cash flow amounting to $1.2 billion in the trailing 12-month period. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
Other Key Picks
Investors interested in the broader Finance space may look at some other top-ranked players like Hut 8 Corp. HUT, WisdomTree, Inc. WT, and HIVE Digital Technologies Ltd. HIVE. Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Hut 8’s current-year earnings is pegged at $2.50 per share, which witnessed one upward estimate revision in the past 60 days against no downward movement. The consensus mark for HUT’s current-year revenues suggests a 55.9% jump from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 51.4% year-over-year growth. During the past two months, WT has witnessed one upward estimate revision against none in the opposite direction. It met earnings estimates thrice in the past four quarters and beat once, with an average surprise of 2.3%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 29.1% year-over-year improvement. During the past 30 days, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues suggests a 36.2% jump from a year ago.
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