Rithm Capital Corp. (RITM) reached a milestone by issuing an $878-million mortgage servicing rights (MSR)-backed securitized note, marking the largest MSR-backed debt issuance in history. This is only the second-ever non-recourse MSR securitization, meaning the debt is backed solely by MSR assets rather than Rithm’s broader financials. The three-year fixed financing provides stability, ensuring predictable cash flow over the lifespan of the assets.This transaction follows Rithm’s first non-recourse MSR secu ...

In the latest trading session, Rithm (RITM) closed at $11.82, marking a +0.94% move from the previous day. This move lagged the S&P 500's daily gain of 1.08%. At the same time, the Dow added 0.92%, and the tech-heavy Nasdaq gained 1.41%.Prior to today's trading, shares of the real estate investment trust had lost 2.25% over the past month. This has was narrower than the Finance sector's loss of 4.3% and the S&P 500's loss of 8.26% in that time.The upcoming earnings release of Rithm will be of great interest ...

Core Insights - The article focuses on analyzing Rithm Capital's (NYSE:RITM) recent performance and comparing it with 17 mortgage real estate investment trust (mREIT) peers, highlighting key metrics such as investment composition, leverage, hedging coverage ratio, and economic returns [1][2][3] Investment Composition and Performance - As of 12/31/2024, RITM's investment portfolio consisted of 18% fixed-rate agency MBS, 0% variable-rate agency MBS, 37% mortgage servicing rights (MSR), and 45% non-agency MBS and other mortgage-related investments [17][18] - RITM's book value (BV) per share increased from $12.31 at the end of Q3 2024 to $12.56 at the end of Q4 2024, reflecting a quarterly increase of 2.03% [20] - The economic return for RITM in Q4 2024 was 4.06%, driven by rising mortgage interest rates and U.S. Treasury yields [20][21] Leverage and Hedging - RITM's on-balance sheet leverage ratio was 2.7x, while the at-risk leverage ratio was 0.9x as of 12/31/2024, indicating a slight increase in on-balance sheet leverage and a slight decrease in at-risk leverage compared to the previous quarter [18][19] - The hedging coverage ratio for RITM was geared towards lower mortgage interest rates, which helped mitigate BV volatility during periods of declining rates [46] Comparative Analysis with Peers - RITM's trailing 24-month economic return of 21.33% was significantly higher than the average returns of its mREIT peers, indicating strong performance relative to the sector [44] - RITM's current stock price of $11.65 per share represented a 6.80% discount to the estimated current BV of $12.50, suggesting that RITM is appropriately valued compared to its peers [41][47] Diversification and Future Outlook - RITM has diversified its investment portfolio through acquisitions, including Sculptor Capital Management and Specialized Loan Servicing, which are expected to drive future growth and returns [29][50] - The company's focus on MSR and related assets positions it well to benefit from rising interest rates, as these assets typically gain value in such environments [25][37]

Company Performance - Rithm (RITM) closed at $11.82, reflecting a +1.81% increase compared to the previous day, outperforming the S&P 500's gain of 1.12% [1] - Over the past month, RITM shares appreciated by 1.31%, while the Finance sector declined by 1.89% and the S&P 500 fell by 4.13% [1] Upcoming Earnings - Rithm is expected to report an EPS of $0.47, which represents a 2.08% decrease from the same quarter last year [2] - The consensus estimate for revenue is $1.19 billion, indicating a 7.35% decline compared to the same quarter last year [2] Full-Year Estimates - The Zacks Consensus Estimates for Rithm's full-year earnings are $1.94 per share and revenue of $4.89 billion, reflecting year-over-year changes of -7.62% and -6.53% respectively [3] - Recent analyst estimate revisions suggest a positive outlook for the company's business [3] Valuation Metrics - Rithm has a Forward P/E ratio of 5.98, which is lower than the industry average of 9.36, indicating that Rithm is trading at a discount [6] - The Financial - Miscellaneous Services industry, to which Rithm belongs, has a Zacks Industry Rank of 35, placing it in the top 14% of over 250 industries [6] Zacks Rank System - Rithm currently holds a Zacks Rank of 2 (Buy), with the Zacks Consensus EPS estimate increasing by 0.91% over the last 30 days [5] - The Zacks Rank system has a strong track record, with 1 stocks delivering an average annual return of +25% since 1988 [5]

Core Viewpoint - Rithm Capital (NYSE: RITM) reported better-than-expected fourth quarter earnings driven by strong performance in servicing and asset management businesses [1] Group 1: Financial Performance - The company continued to support its generous dividend with distributable earnings in the fourth quarter [1] - The mortgage REIT sector is highlighted as a key area of focus for Rithm Capital [1]

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Core Insights - Rithm Capital Corp. (NYSE: RITM) is experiencing acquisition-driven earnings growth and has a high margin of safety regarding its dividend [1] Company Analysis - The company is positioned as a mortgage real estate investment trust, focusing on growth through acquisitions [1] - There is a strong emphasis on innovation and disruption within the financial sector, indicating a proactive approach to investment opportunities [1] Investment Opportunities - The analysis highlights the potential for growth buyouts and value stocks, suggesting a favorable environment for investors looking for high-tech and early growth companies [1]

Acquisition and Mergers - Rithm Capital completed the acquisition of Computershare Mortgage Services for approximately $731.0 million, including $56.0 billion in unpaid principal balance of MSRs and $98.0 billion of third-party servicing UPB[30]. - The "higher for longer" interest rate environment is expected to lead to increased bank merger and acquisition activity, creating further investment opportunities for Rithm Capital[51]. - The company is exploring various opportunities for acquisitions and dispositions of assets, including equity or debt offerings[62]. Market Trends and Forecasts - The Mortgage Bankers Association estimated total U.S. origination volume for 2024 at $1.8 trillion, a 22% increase from $1.5 trillion in 2023, with 28% of activity related to refinance volume[37]. - The Mortgage Bankers Association forecasts a 15% increase in total mortgage origination volume to $2.1 trillion in 2025, with an 8% increase in purchase volume and a 34% increase in refinance volume[37]. - The current market dynamics show increasing home prices, strong credit quality of loans, and rising yields, enhancing the mortgage market's appeal to investors[56]. - The overall financial position of consumers remains strong, despite a rise in delinquencies among recent loan originations[59]. - The affordability challenges posed by higher mortgage rates have reduced home sales, impacting contributions to prepayment speeds from housing turnover[54]. - The demand for Single-Family Rental (SFR) properties is expected to continue due to a long-term shortage of affordable housing in the U.S.[58]. Company Performance and Financials - Sculptor, a subsidiary of Rithm Capital, managed approximately $34.0 billion in assets under management as of December 31, 2024[46]. - Rithm Capital's total assets as of December 31, 2024, amounted to $46.05 billion, an increase from $24.04 billion in 2023[64]. - The company's investments in residential mortgage loans reached $24.11 billion in 2024, up from $19.01 billion in 2023, reflecting a growth of approximately 27.5%[64]. - Rithm Capital's debt increased to $28.28 billion in 2024, compared to $23.64 billion in 2023, representing a rise of about 19.7%[64]. - The portfolio as of December 31, 2024, includes total assets of $46,048,957 thousand, with investments amounting to $28,665,853 thousand[64]. - As of December 31, 2024, total liabilities stand at $38,162,647 thousand, with debt comprising $28,284,762 thousand[64]. Servicing and Income - Servicing income is influenced by the size of the servicing portfolio, delinquency rates, and cost to service per loan[39]. - The "higher for longer" rate environment continues to benefit MSR investors by generating substantial float income and stable cash flows from the large MSR portfolio[55]. - The company reported that 88.9% of the underlying unpaid principal balance (UPB) of mortgages related to owned MSRs is serviced by Newrez[71]. - Revenues are primarily derived from rents collected from tenants for SFR properties, influenced by macroeconomic factors and local market conditions[86]. Investment Strategy and Portfolio - Rithm Capital's investment landscape includes a diverse range of products, such as residential mortgage loans and Non-Agency RMBS, aimed at attractive risk-adjusted yields[49]. - The investment portfolio consists mainly of residential mortgage loans, SFR properties, consumer loans, Non-Agency RMBS, Excess MSRs, and servicer advance investments[79]. - The company expects to continue financing government-backed securities acquisitions with repurchase agreement financing, which typically bears interest rates over SOFR[76]. - The company has financed investments in consumer loans with securitized non-recourse long-term notes, with stated maturity dates of May 2036 and June 2028 for different loan types[89]. - The company retains risk retention bonds from its Non-Agency RMBS portfolio, which are not consolidated under Dodd-Frank regulations[90]. Operational and Regulatory Compliance - The company is subject to extensive regulation by various federal, state, and local authorities, impacting operational compliance[122]. - Rithm Capital aims to maintain compliance with the 40% test under Section 3(a)(1)(C) of the 1940 Act, ensuring that less than 40% of the value of adjusted total assets consists of "investment securities"[133]. - Rithm Capital's subsidiaries that qualify for exclusion from the definition of an investment company must ensure that at least 55% of their assets comprise qualifying real estate assets[135]. - The company regularly monitors its portfolio to maintain compliance with the 1940 Act exclusions, which may limit investment opportunities[139]. Human Capital and Corporate Governance - Rithm Capital emphasizes a diverse and inclusive workplace, with tailored onboarding and training plans for new employees[147]. - The company provides a competitive compensation and benefits package, including medical, dental, and vision coverage, to attract and retain talent[154]. - Rithm Capital's corporate governance includes a board of directors with a majority of independent members, ensuring ethical business conduct[157]. - Rithm Capital's human capital team focuses on recruitment and development, prioritizing candidates with substantial experience and industry relationships[146]. Technology and Innovation - The company has introduced an AI initiative, Rezi AI, aimed at improving efficiencies in servicing call centers, with a multi-year roadmap for broader applications[67].

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Core Insights - Rithm Capital Corp. (RITM) reported strong fourth-quarter results, with shares gaining 4.4% since the announcement on February 6, 2025, driven by improved net servicing revenues and interest income [1][2] - The company's adjusted earnings per share for Q4 2024 were 60 cents, exceeding the Zacks Consensus Estimate by 33.3%, and reflecting a year-over-year increase of 17.6% [2][3] - Total revenues reached nearly $2.1 billion, nearly tripling year-over-year and surpassing the consensus mark by 71% [2][3] Financial Performance - Net servicing revenues were $1.1 billion, significantly up from a negative $7.5 million in the prior-year quarter, beating the Zacks Consensus Estimate by 180.4% [3][6] - Interest income increased by 7.9% year-over-year to $490.3 million, although it fell short of the consensus estimate by 5% [3] - Gain on originated residential mortgage loans rose 105.5% year-over-year to $201.6 million, exceeding the consensus estimate by 15.9% [4] Expense and Income Analysis - Total expenses for the quarter were $1 billion, reflecting a 28.2% year-over-year increase due to higher interest expenses and general administrative costs [4] - Rithm Capital's pretax income was $492.6 million, a significant recovery from a pretax loss of $37.3 million a year ago [5] Segment Performance - In the Origination and Servicing segment, revenues rose to $1.7 billion from $228.8 million year-over-year, with a pre-tax income of $484.7 million compared to a loss of $120.9 million in the prior year [6] - The Investment Portfolio segment saw interest income decline to $72.1 million from $246.9 million year-over-year, resulting in a pre-tax loss of $9 million [7] - Asset Management revenues totaled $268.5 million, with a pre-tax income of $53.4 million in the fourth quarter [8] Financial Position - As of December 31, 2024, Rithm Capital had cash and cash equivalents of $1.5 billion, up from $1.29 billion at the end of 2023, and total assets increased to $45.2 billion from $39.72 billion [9] - Total equity rose to $7.9 billion from $7.1 billion at the end of 2023 [9] Capital Deployment - The company did not repurchase any shares in 2024 but announced a new share repurchase program of $200 million through December 31, 2025 [11] - A quarterly common dividend of 25 cents per share was paid, totaling $130.2 million [11] Full Year Overview - For the full year 2024, total revenues improved by 38.5% year-over-year to $5.2 billion, while adjusted earnings per share rose by 1.9% [12]