Walker & Dunlop Downgraded: Financial Market Challenges And Fed Policy Put A Damper On Growth

JMP Securities analyst Steven C. DeLaney downgraded Walker & Dunlop Inc WD to Market Perform from Market Outperform.
The analyst is cautious due to rising U.S. financial and commercial real estate market challenges, mainly on aggressive Fed monetary policy.
The analyst notes that WD derived 43% of 2022 revenues from lending and property sales businesses and is bearish on the company's guidance of low-to-teens return to equity in 2023.
However, DeLaney thinks that escrow earnings can offset the negative impact of slower lending, with WD expecting escrow balances to generate $30 million-$32.5 million per quarter in 2023.
The analyst sees that the pace of lending is slower in 2023, with volumes at Fannie Mae declining 36.2% Y/Y and Freddie Mac decreasing 57.7% Y/Y. Consequently, he projects lower-than-expected volumes in 2023.
For 2023, WD expects double-digit Y/Y growth in both core EPS and adjusted EBITDA.
The analyst lowered the 2023 adjusted EPS estimate to $5.00 (consensus $5.95) from $7.05 and expects 2024 EPS to be $6.00 (consensus $7.03).
The analyst expects Q1 2023 EPS to be $1.00 (consensus $1.10).
Price Action: WD shares are trading lower by 5.09% at $63.76 on the last check Tuesday.

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