Rocket Companies Jumps After Pre-Announcing 437% Revenue Growth

Rocket Companies Inc RKT shares gained as much as 10% on Friday morning after the company reported preliminary earnings numbers for the second quarter.

The Numbers: Rocket Companies reported $3.5 billion in net income compared to a $54 million net loss in the same quarter a year ago. Second-quarter revenue of $5 billion was up 437% year-over-year.

Rocket also reported $72.3 billion in closed loan origination volume, up 40% from the first quarter.

“I'm incredibly proud to share our record-breaking results for the second quarter of 2020, which reflect the power of our platform and our team members' unwavering commitment to deliver a great experience for each and every one of our clients," CEO Jay Farner said in a press release.

The preliminary earnings report was a one-time event following the company’s IPO on Aug. 6. Rocket said the company plans to release its full second-quarter report and hold its first earnings call on Sept. 2.

Volatile Debut: Rocket shares have been extremely volatile in their first week of trading. After pricing its IPO shares at $18, the stock jumped as high as $26.85 in its first two days of trading before dropping back to under $18.50 this week.

On Thursday, Susquehanna analyst Jack Micenko initiated coverage of Rocket with a Neutral rating and $18 price target, warning investors that Rocket is likely currently reporting peak cyclical earnings.

“The challenge unfortunately is that while EBITDA margins for RKT are comparable to fintech margins today, they are highly dependent on volume and not sustainable through the cycle,” Micenko wrote in a note.

Benzinga’s Take: At first glance, Rocket’s earnings and revenue growth rates seem mind-boggling, but emergency Federal Reserve interest rate cuts back in March triggered a boom in the mortgage market. Investors should be watching closely for third-quarter and longer-term guidance from the company when it holds its earnings call on Sept. 2.

The stock traded higher by 5.3% to $19.71 at the time of publication.

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