Why These Rocket Companies Analysts Are Sidelined After Q2 Earnings

Shares of Rocket Companies Inc RKT were trading higher by double digits after reporting second-quarter earnings. Here are the key takeaways from analysts’ updated notes.

The Rocket Companies Analysts: Credit Suisse analyst Timothy Chiodo has a Neutral rating on Rocket Companies and lowered the price target from $19 to $18.

Barclays analyst Marc DeVries has an Equal-Weight rating and $19 price target.

Wells Fargo analyst Donald Fandetti has an Equal-Weight rating and $20 price target.

RBC Capital Markets analyst Daniel Perlin has a Sector Perform rating and lowered the price target from $26 to $24.

Related Link: Rocket Companies Shares Rise On Q2 Earnings: What Investors Should Know 

The Rocket Companies Analyst Takeaways: Rocket Companies — the parent company of Quicken Loans and Rocket Mortgage, among others — missed second-quarter estimates for revenue and earnings per share.

“We remain constructive on Rocket’s underlying business, strong brand and technology platform but remain neutral,” Chiodo said.

The analyst points to Rocket’s valuation being in line with peers.

Third-quarter guidance from the company could show signs of stabilization in volumes and margins, DeVries said.

“It (RKT) remains heavily exposed to refinance activity which we expect to slow over the next 12-18 months, impacting volumes and margins,” DeVries said.

Fandetti calls it a “good quarter," noting the challenging mortgage origination market. The second quarter showed Rocket can take market share from peers, the analyst noted.

“While RKT continues to execute well and is showing they are best in class, we are staying on the sidelines with the stock,” Fandetti said.

The analyst notes sentiment is negative on Rocket shares but calls it “notable” that estimates are being raised for the third quarter.

Perlin said the third-quarter guidance "points to a solid year." Origination volumes are on track for a record year, the analyst notes.

Growth in non-refinanced products was highlighted by Perlin, who noted that over 50% of closed loan volume in the second quarter came from less rate-sensitive products.

“In addition, as the company continues to expand its addressable market, most recently with the launch into solar panel installations & financing, we believe the company will continue to diversify its overall portfolio,” Perlin said.

RKT Price Action: Shares of Rocket Companies were up 11.36% at $19.46 at the time of publication.