Analysts React To Rocket Companies Q3 Earnings: 'Differentiated Tech-Driven Platform'

Rocket Companies Inc RKT shares fell about 3.3% on Wednesday after the company reported a record third quarter on Tuesday afternoon.

The Numbers: Rocket Companies, which is the parent company of Rocket Mortgage and Quicken Loans, reported third-quarter adjusted EPS of $1.21 on revenue of $4.74 billion. Both numbers topped consensus analyst estimates of $1.07 and $4.55 billion, respectively. Revenue was up 163% compared to a year ago.

Closed origination volume was up 122% to a record $89 billion in the quarter. Net rate lock volume was up 101% to $94.7 billion.

Rocket also announced a $1 billion share buyback program and guided for fourth-quarter closed loan volume of between $88 billion and $93 billion.

Related Link: JPMorgan Upgrades Rocket Companies, Predicts Rotation To Credit-Sensitive Stocks

Voices From The Street: Morgan Stanley analyst James Faucette said Rocket is so far delivering on its long-term goals.

“Still, the qtr does little to resolve key debates (especially as conditions may shift), and its buyback authorization is likely a less preferred path for capital return,” Faucette wrote in a note.

Credit Suisse analyst Timothy Chiodo is bullish on Rocket’s underlying business but is concerned about the impact of rising competition and rising interest rates in the long-term.

“Rocket continues to win in the marketplace with a combination of technology & customer service, benefiting from industry leading retention rates (now ~4.5x industry averages),” Chiodo wrote.

Bank of America analyst Jason Kupferberg said Rocket’s third-quarter numbers highlight its “differentiated tech-driven platform.”

“We think growth momentum should continue for the foreseeable future given cyclical tailwinds, RKT’s market-leading client retention rates, expansion of the partner network (volumes skewed toward purchase market), and continued growth in the direct to consumer channel,” Kupferberg wrote.

RKT Ratings And Price Targets:

• Morgan Stanley has an Equal-Weight rating and $23 target.
• Credit Suisse has a Neutral rating and $27 target.
• Bank of America has a Buy rating and $27 target.

Rocket's stock traded around $20.88 per share at publication time.