Rocket Companies 'Firing On All Cylinders,' BofA Says After Q4 Print

Rocket Companies Inc RKT reported Thursday with fourth-quarter results that signal the online mortgage, real estate and e-commerce holding company is "firing on all cylinders," according to BofA Securities.

The Rocket Companies Analyst: Jason Kupferberg maintains a Buy rating on Rocket Companies' stock with an unchanged $27 price target.

The Rocket Companies Thesis: Mortgage companies have come under pressure in recent weeks amid interest rate increases and the potential impact on mortgage volumes and margins, Kupferberg said in a note.

This thesis may have been proven wrong after the company's strong execution in the fourth quarter and a new partnership with Morgan Stanley MS to originate and service conforming loans from its bank and E*Trade clients, the analyst said. 

Related Link: Rocket Companies CEO Jay Farner Talks Long-Term Goals After Q4 Beat

BofA's five key takeaways from the earnings report are:

1. Revenue of $4.775 billion beat the research firm's estimate of $3.855 billion and the EPS of $1.14 beat estimates of 84 cents per share.

2. Funded originations were $107.2 billion versus estimates of $89.5 billion. The rate lock volume of $95.7 billion also came in ahead of the $85.9 billion expected and management's own guidance of $80 billion to $87 billion. The strong performance likely led to Rocket increasing its market share from 7.5% last quarter to 8.9% in the fourth quarter.

3. The gain on sale margin of 4.41% beat estimates of 4.11%.

4. Direct-to-consumer and partner channels reported $68 billion and $38 billion in funded volume, respectively.

5. Total expenses were higher than expected at $1.81 billion versus $1.665 billion and accounted for 37.9% of adjusted revenues.

Rocket's first-quarter guidance also came in "meaningfully above" expectations and should result in an upward revision cycle, Kupferberg said.

Rocket is modeling for first-quarter closed loan originations of $98 billion to $103 billion versus the consensus estimate of $76 billion.

RKT Price Action: Rocket shares gained 9.8% in Friday's session, closing at $21.85.